Singapore signs DTA with Guernsey(2)

Singapore has inked a double tax agreement with the European fund domicile in an attempt to pull in more Asian private equity funds.

Singapore has signed a double tax agreement with popular fund domicile Guernsey, one of the UK’s Channel Islands, according to a statement from Guernsey Finance. The agreement gives comfort to funds with interests in both locations that they will not be taxed twice on their assets. 

Peter Harwood, chief minister of Guernsey and T. Jasudasen, Singapore’s high commissioner to the UK, signed the agreement on 6 February 2013 during a series of meetings in London.

“For several years we have been raising awareness of Guernsey in the Far East, including Singapore. We have built a good understanding with both the Singapore Stock Exchange and the local regulator, the Monetary Authority of Singapore, and now several Guernsey firms, such as Collas Crill and International Administration Group (IAG), have established operations in Singapore,” Fiona Le Poidevin, chief executive of Guernsey Finance, said in the statement.

Singapore is becoming increasingly popular for fund managers as it offers tax exemptions to firms with a substantial office and team presence in the country. 

The double tax agreement with Guernsey is intended to encourage Singapore-based GPs to domicile their vehicles in Guernsey if they want to raise funds from the European Union. Non-EU funds will face increased regulation in terms of marketing and raising capital from the EU when the Alternative Investment Fund Managers Directive comes into effect in July 2013. 

However, industry voices are skeptical about the impact of the DTA on Asian private equity. 

“This news is not groundbreaking, but more an affirmation as to why Singapore makes sense for sponsors and private equity managers now. Singapore is a hub for management teams – if GPs are looking to set up an Asian office, Singapore is a natural destination if the fund’s strategy is India, Southeast Asia and basically anything except China,” explained Clifford Chance corporate practice partner Han Ming Ho.

“What really is of relevance is the tax treatment that funds will now be able to enjoy because of what Singapore signs as a sovereign, with other sovereign states globally.”

But Anita Choi, counsel at O’Melveny & Myers, explained Asian GPs are unlikely to take advantage of the new DTA. “It doesn’t really have an impact because the go-to jurisdiction for setting up funds, at least for Asian funds, has been the Cayman Islands. Right now, there is no movement away from Cayman.”

Nevertheless, the move reaffirms Singapore’s commitment to providing an attractive offering to fund managers. Hong Kong, by comparison, lacks the same tax exemptions and benefits to private equity firms, something the HKVCA is lobbying to change. 

Ho said, “What Singapore has done is carve out asset management and focused on certain asset managers, especially in the private equity space, and has created very specific incentives and legislation sending the message that they recognise this industry as a valued industry and are willing to treat them differently.”