GST Changes For The Fund Management Industry

Singapore has established itself as a leading global financial centre over the past few decades. To further strengthen Singapore’s position as a hub for both fund management and domiciliation, the Monetary Authority of Singapore (MAS) is currently studying the regulatory framework for Singapore Variable Capital Companies (S-VACCs). S-VACCs are a new legal entity or structure designed for collective investment schemes that will accommodate a variety of traditional and alternative asset classes and investment strategies.

In the 2018 Singapore Budget, it was announced that a tax framework for S-VACCs will be introduced to complement the S-VACC regulatory framework and this includes extending the existing GST remission for funds to incentivise S-VACCs.

GST remission for funds
Generally, 7% GST is chargeable on fund management, custodian, and other services supplied by GST-registered suppliers to funds belonging in Singapore. Only GST-registered funds making taxable supplies are able to claim the GST incurred on its expenses. As some of the funds are not eligible for GST registration due to the type of investment activities made, the GST incurred on the fees charged would be an unrecoverable business cost to the funds.

A GST remission was introduced on 22 January 2009 to allow qualifying funds that are managed by a prescribed fund manager in Singapore to claim GST incurred on all expenses related to the fund’s investment activities (except disallowed expenses) from 22 January 2009 to 31 March 2014 (both dates inclusive) at an annual recovery fixed rate. In the 2014 Singapore Budget, the GST remission was extended to 31 March 2019.

To qualify for the GST remission, the following conditions must be met:

• The fund must satisfy conditions for income tax concessions in Singapore as a Section 13C, 13G, 13R, 13X fund, of 13CA fund (with effect from 1 January 2014) or a designated unit trust or a unit trust included under the CPF1 Investment Scheme (CPFIS) as at the last day of its preceding financial year.
• The fund must be managed or advised by a prescribed fund manager2 in Singapore. Funds that meet the qualifying conditions are required to file a quarterly statement of claims to make the claims based on their financial year end. This allows funds that are not eligible for GST registration to mitigate the GST incurred while doing business in Singapore.

With respect to S-VACCs, the above will take effect on or after the effective date of the S-VACC regulatory framework and MAS will release further details by October 2018.

How BDO in Singapore can assist
BDO in Singapore can help assess whether a fund is eligible for the GST remission (under the existing income tax concessions or under the S-VACC). BDO in Singapore can also assist funds with filing of the quarterly statement of claims for the purpose of making the GST claims.

¹ Central Provident Fund – A mandatory social security savings scheme funded by contributions from employers and employees.
² One that holds a capital markets licence under the Securities and Futures Act (Cap. 289) for fund management or one that is exempt under the Act from holding such a licence .