The special purpose vehicle (SPV) is an investment structure operating as a division of the business that established it. This means that it is independent of the parent company and that its financial activities are documented on a different balance sheet. Every investment that is set up as an SPV is essentially a private limited company on its own. 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.
Setting up a company in Singapore implies complying with specific steps which are usually the same no matter the business form. However, in the case of the special purpose enterprise, an additional procedure must be considered: that of establishing the purpose of the company. Other than that, the procedure implies:
Feel free to address our Singapore company formation agents if you need assistance in setting up a SPV.
It is possible to establish a Singapore SPV for various purposes. However, the most employed are:
Parent companies are able to lawfully separate project risks for the purpose of sharing them with other investors. Securitization is the process of pooling different kinds of contractual debt, such as credit card debt, auto loans, commercial mortgages, and residential mortgages, and selling it to different investors as bonds, securities, or collateralized mortgage obligations (CMOs). When a company wants to transfer assets, it can do so by creating an SPV to hold the assets and then selling the SPV as part of a merger or acquisition process.
If the capital gain obtained from the sale of a property exceeds the taxes on the sale, the parent company may set up a SPV in Singapore to hold the properties available for sale. Then, instead of paying the property sales tax, it can sell the SPV and pay tax on the capital gain from the sale.
If you decide to open a company in Singapore as a SPV, feel free to use our dedicated services.
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.
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 set up 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.
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:
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.
When opening a SPV in Singapore, the following laws and regulations must be respected:
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 that 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.
Opening a SPV/SPE in Singapore comes with several advantages, among which:
Our Singapore company formation consultants can offer more information on the advantages of special purpose vehicles.
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.
Meanwhile, we invite you to watch our concise video about the SPV company:
The same yearly reporting procedures that apply to Singapore private limited companies also apply to SPVs. There are, however, a few distinct aspects that apply to the latter only. For example, although the parent company and the SPV are two different entities, the former that is listed on the Stock Exchange may be required to disclose the assets and liabilities of its SPV in its own financial statements. This type of financial statement consolidation is required if the business satisfies all of the following requirements:
SPVs are required to publish general purpose financial documents with the Inland Revenue Services if they satisfy two out of the three requirements listed below:
To prepare the consolidated financial statements, the following elements must be present in order for an entity to be considered to control an SPV:
If you want to open a company in Singapore and need accounting services, our specialists can offer tailored services, including those related to the taxation and accounting requirements imposed on SPVs.
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.