VCC vs Cayman SPC: Why Singapore Is the New Fund Domicile

Introduction

For decades, the Cayman Islands Segregated Portfolio Company (SPC) was the default choice for Asia-focused fund managers seeking a flexible, tax-neutral fund vehicle. But times have changed. Since Singapore launched its Variable Capital Company (VCC) framework in January 2020, an increasing number of fund managers — from boutique hedge funds to multi-billion-dollar private equity houses — are choosing Singapore as their fund domicile. By 2026, this shift has become a genuine trend rather than a passing curiosity.

This guide compares the VCC and the Cayman SPC across the dimensions that matter most to fund managers and their investors: legal structure, tax treatment, regulatory environment, cost, and investor perception. If you are evaluating where to domicile your next fund, read on before you decide.

What Is a Singapore VCC?

The Variable Capital Company (VCC) is a corporate structure established under the Variable Capital Companies Act 2018 (the “VCC Act”) and administered by the Monetary Authority of Singapore (MAS). It is the only corporate form in Singapore designed exclusively for collective investment schemes.

The VCC’s defining feature is its variable capital structure: unlike an ordinary company, a VCC can issue and redeem shares freely without the formalities required under the Companies Act 1967. This makes it ideally suited to open-ended fund structures where investors subscribe and redeem on a regular basis.

A VCC can operate as:

• A standalone fund with a single investment strategy; or
• An umbrella fund housing multiple sub-funds, each with its own investment mandate, investor base, and ring-fenced assets and liabilities.

The umbrella structure is particularly powerful: a fund manager can consolidate multiple strategies under a single legal entity, sharing administrative infrastructure while maintaining statutory segregation between sub-funds. For more background, see our article on The Variable Capital Companies Act 2018.

What Is a Cayman Islands SPC?

The Cayman Islands Segregated Portfolio Company (SPC) is a company incorporated under the Cayman Islands Companies Act that allows for the creation of separate “segregated portfolios,” each with ring-fenced assets and liabilities. Like the VCC’s sub-funds, each segregated portfolio is legally protected from the creditors of other portfolios within the same SPC.

The Cayman SPC has been a cornerstone of global alternative asset management since the late 1990s. It is well understood by institutional investors, prime brokers, and fund administrators worldwide.

Key Comparison: VCC vs Cayman SPC

The Tax Advantage: Singapore’s 13O and 13U Exemptions

The VCC’s most compelling advantage over the Cayman SPC is access to Singapore’s statutory tax exemption schemes under Sections 13O and 13U of the Income Tax Act 1947.

Section 13O (formerly 13R) — Onshore Fund Tax Exemption

Under Section 13O, a Singapore-resident fund managed by a Singapore-based fund management company (FMC) is exempt from income tax on specified income (including capital gains, dividends, and interest) from designated investments. The key requirements are:

• Minimum assets under management (AUM) of S$10 million at the point of application;
• The fund must employ at least one investment professional in Singapore; and
• Local business spending of at least S$200,000 per year.

Section 13U (formerly 13X) — Enhanced Tier Tax Exemption

Section 13U applies to funds with a minimum AUM of S$50 million and requires:

• The fund management company to employ at least two investment professionals in Singapore;
• Local business spending of at least S$500,000 per year; and
• No restriction on the fund’s residency (13U is available to both Singapore-resident and non-resident funds).

Critically, neither scheme taxes capital gains — Singapore does not impose capital gains tax under any circumstance. This means a VCC with 13O or 13U status is effectively zero-rated on investment returns, comparable to the Cayman’s tax-neutral position but with the added benefit of treaty access.

From 1 January 2025, AUM is measured against the value of designated investments recognised as assets in the fund’s financial statements — a tighter definition that fund managers should factor into their planning.

Singapore’s Double Tax Agreement Network

One of the VCC’s structural advantages over a Cayman SPC is access to Singapore’s extensive tax treaty network, which covers over 100 jurisdictions including India, China, Indonesia, Vietnam, and most of the OECD. A Singapore VCC investing into Asian markets can potentially reduce withholding tax on dividends and interest — a benefit simply unavailable to a Cayman structure.

For funds with significant Asian portfolio exposure, this treaty access can meaningfully improve net returns to investors.

Regulatory Credibility and Investor Appetite

The post-2020 global environment has shifted institutional investor preferences. Following increased scrutiny of offshore structures — from the OECD BEPS framework to enhanced CRS reporting — many Asian development finance institutions (DFIs), sovereign wealth funds, and family offices now expressly prefer onshore, regulated fund vehicles.

MAS oversight gives the VCC a layer of regulatory credibility that Cayman structures, despite their long track record, increasingly struggle to match in Asian capital-raising. By 2026, several major Singapore-based fund managers — including those managing real estate, private credit, and infrastructure strategies — have publicly cited regulatory legitimacy as a primary reason for choosing the VCC.

That said, US and European institutional investors remain most comfortable with Cayman vehicles, where their legal and operational due diligence teams have decades of experience. For globally distributed LP bases, a parallel fund approach — VCC for Asian investors, Cayman for international capital — remains common.

Cost Comparison in 2026

A persistent myth is that VCCs are significantly cheaper than Cayman SPCs to operate. In practice, the gap has narrowed considerably. Since Cayman introduced mandatory economic substance requirements in 2019 and tightened audit obligations, Cayman operating costs have risen.

For a typical umbrella VCC with three to five sub-funds:

• Setup costs: USD 20,000 – 35,000 (ACRA fees, legal structuring, MAS notification)
• Annual operating costs: USD 30,000 – 60,000 (fund administration, audit, compliance, corporate secretarial)

For a comparable Cayman SPC:

• Setup costs: USD 25,000 – 45,000
• Annual operating costs: USD 35,000 – 70,000 (substance, audit, CIMA fees, registered office)

On a total cost of ownership basis, the VCC is modestly cheaper — and the tax savings from 13O/13U exemptions make the total economic case significantly more favourable for Singapore-managed strategies.

VCC Re-Domiciliation: Migrating from Cayman to Singapore

The VCC Act expressly permits inward re-domiciliation: a foreign corporate fund can transfer its domicile to Singapore and continue as a VCC without dissolution and re-incorporation. This has enabled several Cayman-domiciled funds to migrate to Singapore as they deepen their Asia footprint.

If you are considering striking off or migrating a Cayman structure, our article on Striking Off a Variable Capital Company (VCC) covers the VCC lifecycle from registration to dissolution.

When to Choose VCC vs Cayman SPC

Choose a Singapore VCC when:

• Your primary investor base is Asian (Singapore, China, Southeast Asia, India)
• You want access to Singapore’s DTA network for treaty benefits
• Regulatory credibility and MAS oversight are important to your LPs
• Your fund manager is already licensed or exempt under MAS
• You are structuring a family office and want to combine 13O/13U with a fund vehicle
• You are setting up a VCC for ESG or impact investing strategies where governance matters

Choose a Cayman SPC when:

• Your LP base is primarily US or European institutional investors already familiar with Cayman
• You need maximum global tax flexibility and are not primarily invested in Asia
• Your prime broker, administrator, and legal counsel have existing Cayman infrastructure
• Speed of setup is paramount and you have no MAS licensing in place

Compliance Obligations for Singapore VCCs

Unlike a Cayman SPC, a VCC operates within Singapore’s regulatory ecosystem. Key ongoing obligations include:

• Filing of annual returns with ACRA (see our Step-by-Step Guide to Filing Annual Returns)
• Annual audit by a Singapore-registered auditor
• Maintenance of statutory registers (directors, members, registrable controllers)
• Appointment of a Singapore-resident company secretary (see Key Responsibilities of a Company Secretary in Singapore)
• MAS reporting obligations depending on the fund manager’s licence type
• CRS/FATCA reporting for sub-funds with foreign investors

For a comprehensive overview of Singapore company compliance requirements, refer to our article on Important Compliance Requirements for Singapore Companies.

Conclusion

The Singapore VCC has matured from a promising new structure into a credible and often preferred alternative to the Cayman SPC for Asia-focused fund managers. Its combination of statutory tax exemptions, treaty access, MAS regulatory oversight, and flexible sub-fund architecture makes it a compelling domicile choice — particularly as Asian investor capital grows in scale and sophistication.

Whether you are structuring a new fund or considering re-domiciling an existing Cayman vehicle, the VCC warrants serious consideration. The team at Raffles Corporate Services can guide you through the VCC incorporation process, MAS licence requirements, and ongoing compliance obligations. Contact us to discuss your fund structuring needs.

— The Editorial Team, Raffles Corporate Services