The special purpose vehicle or entity (SPV/SPE) is mainly used in the investment funds industry and is the correspondent of subsidiaries of foreign companies in Singapore. The SPE or SPV is usually set up in order to ensure the business in Singapore will continue even if anything goes wrong with the parent company. Protection against bankruptcy is the main advantage a special purpose vehicle offers in Singapore. The SPV is usually preferred to other types of investment vehicles because of the enhanced protection from an accounting point of view.
The special purpose vehicle or entity is usually created for specific purposes or for a limited period of time.
Our company registration agents in Singapore can offer more information on the investment funds industry in the city-state. We can also help investors with the company registration procedure of a special purpose entity in Singapore.
Meanwhile, we invite you to watch our concise video about the SPV company:
How are SPVs used in Singapore
Banks or insurance companies in Singapore are most prone to set up SPVs or SPEs in the city-state. This usually happens because these types of Singapore companies can offer new investment possibilities which cannot be offered by usual funds, such as hedge funds. The SPV is suitable for investment banks because they offer protection related to loans and other monetary tools. The SPV is also used to secure certain assets in Singapore or even to fund new ventures. The Singapore SPV can offer an investor the possibility to allocate money for a specific project alone. Another reason to use a SPV is to raise capital, as this type of entity can borrow money with lower interest.
However, those considering to open a company in Singapore under the form of a SPE or SPV should take into consideration that there are certain risks related to employing them. Our local company formation agents can offer details related to these risks.
The use of SPV for startup companies in Singapore
Even if special purpose entities are commonly used in the investment funds industry, in the last few years, these types of structures have also become popular among those interested in setting up startup companies in Singapore. This is possible because of startups need funding which can be obtained easier and more securely through a SPV.
Among the benefits of using a Singapore SPV when creating a startup are:
- the SPV will help the investors put money and receive equity in startup companies;
- through an SPV, investors can create syndicates through which an important sum of money can be invested in a startup;
- through the same SPV, the startup will only have to deal with one company instead of a larger number of investors;
- the startup can attract a larger number of investors willing to put money in a project through a SPV;
- the amount of money needed for the startup will be lower when coming from an SPV than from several funding sessions.
If you want to open a company in Singapore under the form of a startup and need more information on how the SPE can be used for such a purpose, you can ask for guidance from our local advisors.
How to open a company in Singapore under the form of a SPE
When opening a SPV in Singapore, the following laws and regulations must be respected:
- – the Companies Act which does not specifically provide for the SPV, but for the other types of structures which can be used to create it;
- – the Banking Act is also a relevant law when it comes to opening a SPV because of its characteristics;
- – the Securities and Futures Act which provides for the issuance of securities, a common financial instrument related to SPVs;
- – the Income Tax Law – it must be noted that SPVs are subject to different taxation and accounting requirements compared to other Singapore companies;
- – the Bankruptcy Act which provides for specific regulations when it comes to the dissolution of a SPV.
Our Singapore company formation specialists can offer more information on the laws applying to special purpose vehicles.
The limited liability company is the most employed type of structure when setting up a SPV in Singapore. The company must be registered with the Trade Register as any other type of entity.
One should also know that a Singapore SPV or SPE is subject to different accounting requirements than companies incorporated for commercial purposes.
The other form which can be used for creating a SPV in Singapore is the limited liability partnership which can also be used for investment purposes. Trusts and joint ventures can also be employed as legal entities for the creation of SPEs in Singapore. Those who want to register a SPV, no matter the legal entity chosen, only need to stipulate in the incorporation documents the main object of activity of the company which must comply to those suitable for such an entity.
The advantages of setting up a SPE in Singapore
Opening a SPV/SPE in Singapore comes with several advantages, among which:
- – they are a good option for those who want to limit the financial risks some companies are exposed to;
- – the SPV can be created by one or more companies with the purpose of separating the assets of the shareholders from those of the company;
- – as mentioned earlier, the SPV can be used for specific projects, which in another situation would endanger the entire company creating it;
- – the SPV is also a good option for those interested in having various intellectual property rights protected;
- – for specific projects in which a large number of licenses and permits are required, the SPV can be used for obtaining all the permits through one entity;
- – the SPV can be used for holding real estate property as assets which can be sold together under the form of the SPV rather than separately.
Our Singapore company formation consultants can offer more information on the advantages of special purpose vehicles.
Taxation and accounting of SPVs in Singapore
From a taxation point of view, the SPV will be imposed the corporate tax in Singapore, however, from an accounting point of view, the company will be required to file consolidated financial statements.
Among the specific tax regulations applicable to Singapore special purpose vehicles are those related to the Goods and Services Tax – SPVs are exempt or subject to a 0% GST rate depending on the types of assets received.
The SPV is required to pay the stamp duty in relation to the execution of various documents related to properties and shares. Also, Singapore SPVs are subject to withholding taxes on interests and royalties when paid by a Singapore payer to a non-resident.
If you want to set up a SPV in Singapore and need assistance, do not hesitate to contact us. Our Singapore company formation consultants can also offer information on the accounting requirements for SPVs and SPEs.
If you want to open a company in Singapore and need accounting services, our specialists can offer tailored services, including related to the taxation and accounting requirements imposed on SPVs.