Singapore VCC insights

Closed-End Fund Treatment 13O and 13U: When a Non-SFO Fund Should Elect

By VCC Editorial Team · Published 26 October 2026

Short answer: Non-SFO funds with S13O, S13OA or S13U awards commencing on or after 1 January 2025 may irrevocably elect closed-end fund treatment. Local business spending is tested cumulatively to the tenth incentive year and waived from the eleventh, but the award ends at the earlier of the divestment phase’s end or the 20th incentive year.

This article is general information only and is not legal, tax or investment advice. For matters needing legal advice, we work with a panel of experienced Singapore law firms.

The closed-end fund treatment for 13O, 13OA and 13U funds is one of the quieter changes in the Monetary Authority of Singapore (MAS) circular on fund tax incentives. It matters most to managers of fixed-life private equity, credit, real estate and infrastructure vehicles, including sub-funds of a Singapore variable capital company (VCC). We checked the primary sources on 26 October 2026. Points that turn on the detail in Annexes 8 and 8A of the circular are flagged where they arise. Capital calls and investment period extensions under fund documents are covered separately in our posts on running a closed-ended VCC capital call and extending a closed-end VCC investment period.

What is the closed-end fund treatment for 13O and 13U funds?

It is an optional way of applying the LBS condition, built for funds with fixed lives. Instead of meeting a spending floor every year for as long as the award lasts, the fund meets a running cumulative total up to its tenth incentive year, after which the LBS condition is waived.

MAS explains the policy reason in paragraph 3.8 of FDD Circular 05/2026. Closed-end funds typically have fixed lives, commonly 10 years, with set fundraising and redemption periods. Their spending falls as investments are sold, typically after the fifth year. Under a strict annual test such a fund can lose its exemption in exactly the years it is realising gains.

The treatment changes only how spending is measured. The circular defines LBS as operating expenses recognised under accounting principles and paid to contracting parties in Singapore, including remuneration, fund management fees and other operating costs. Nothing in paragraphs 3.8 to 3.11 relaxes the investment professional (IP) condition. That condition requires the fund management company (FMC) to employ at least 2 qualifying IPs for S13O and S13OA funds and at least 3 for S13U funds.

Which funds can elect the closed-end fund treatment under 13O, 13OA or 13U?

Only non-SFO funds under the S13O, S13OA or S13U schemes whose awards commence on or after 1 January 2025. Paragraph 3.9 of the circular states the eligibility in those terms.

A non-SFO fund is any fund vehicle that is not an SFO fund. Under the circular, an SFO fund holds assets primarily originated from members of the same family and is managed by a single family office exempted from licensing under paragraph 5(1)(ba) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations. Non-SFO funds must have capital from third-party investors or a bona fide intention to raise it (paragraph 3.1).

The vehicle rules are unchanged by the election. Under the circular, S13O covers companies incorporated and resident in Singapore, S13OA covers limited partnerships registered in Singapore, and S13U covers approved fund vehicles of any form and approved master-feeder and SPV structures. A VCC can use either S13O or S13U. The Inland Revenue Authority of Singapore (IRAS) confirms in its e-Tax Guide “Tax Framework for Variable Capital Companies” (Fourth Edition, 22 April 2026) that VCCs are considered for the section 13O and 13U incentives under the Income Tax Act 1947.

How does the cumulative local business spending test work?

The fund multiplies its annual tiered minimum by the number of incentive years elapsed and must have spent at least that cumulative amount by the end of each incentive year up to the tenth. Over-spending early carries forward; under-spending must be caught up.

The circular’s own example uses a fund on the S$200,000 tier. Its cumulative minimum is S$200,000, S$400,000, S$600,000 and so on, up to S$2,000,000 by the tenth incentive year. If the fund spends S$600,000 in its first incentive year, it has met the cumulative test for the first three incentive years even if it spends nothing in the second and third.

The annual tier is set by AUM in DI at the end of each basis period:

AUM in DI at end of basis period	Annual minimum LBS	Cumulative minimum by year 10 if the tier never changes
Below S$250 million	S$200,000	S$2,000,000
S$250 million to below S$2 billion	S$300,000	S$3,000,000
S$2 billion and above	S$500,000	S$5,000,000

The third column is our arithmetic and assumes the fund stays in one tier for ten years. Real funds move between tiers as capital is drawn and returned. The main body of the circular does not say how the cumulative target is built when the tier changes mid-life. MAS points readers to Annex 8 for the details, and a manager should check it and model tier movements before electing.

Two timing points. In the circular’s illustrations the first incentive year runs from award commencement to the end of the first basis period, and Annex 6, paragraph 2 prorates conditions for a part-period. Separately, S13O and S13OA non-SFO funds with awards commencing between 1 January 2025 and the end of the basis period for Year of Assessment (YA) 2027 meet a S$200,000 total business spending condition until YA 2028, with tiered LBS from YA 2028 (paragraph 3.4(c) and Annex 6A). How those transitional years count towards the cumulative total is an Annex 8 question, not one the main body answers.

When does the award end under the closed-end fund treatment?

The award is revoked with effect from the end of the fund’s divestment phase or the day immediately after its 20th incentive year, whichever is earlier (paragraph 3.10). MAS ties this to the premise that the fund has a fixed lifespan.

This is the cost of the waiver. Outside the treatment, the exemption lasts for the life of the fund, provided the conditions are met in each basis period (paragraph 2.3). Under it, a fund still holding assets at year 20 loses its award the day after its 20th incentive year, whatever its documents say about extensions.

From the eleventh incentive year the LBS condition is waived, while the other conditions of the scheme, including the IP condition, continue until revocation.

Can an existing 13O or 13U fund switch to the closed-end treatment?

Yes, but only by giving up its current award. Paragraph 3.11 states that a fund with an existing S13O, S13OA or S13U award may opt in, and that the election entails revoking the existing award and applying for a new one.

In practice the sequence is:

1. Confirm the fund is a non-SFO fund and that the new award would commence on or after 1 January 2025.
2. Model LBS for each remaining incentive year on the cumulative basis, including likely tier changes and the year-20 limit.
3. Check the new application against the entry conditions that apply when it is made: S$5 million AUM in DI for S13O and S13OA non-SFO funds (with a grace period to the end of the basis period of the third YA), or S$50 million for S13U, plus the IP condition.
4. Read Annexes 8 and 8A, which MAS points to for the details of the treatment and its FAQs, and agree the timing of revocation and new commencement with MAS.
5. Update the fund’s tax and compliance calendar and annual declarations from the new award date.

On our reading, incentive years then run from the new award. The circular also notes that the schemes expire on 31 December 2029 unless extended after a Government review. Funds awarded by that date continue to enjoy the exemption for the life of the fund. A manager thinking about re-applying should not leave it until the review.

How does committed capital interact with the election at entry?

For S13U, a closed-end fund can usually rely on committed capital to meet the S$50 million entry condition. For S13O and S13OA non-SFO funds, the S$5 million entry condition comes with a grace period, so drawdown timing rarely blocks the application.

Annex 7, paragraphs 11 to 17 set out the S13U committed capital concession. A real estate, infrastructure, private equity (including private equity fund of funds), debt or credit fund operating on a committed capital basis is treated as meeting the minimum AUM in DI condition at the point of application if it has secured committed capital of at least the required minimum. The commitments must be legally enforceable, part of the manager’s fees must be charged on committed capital including undrawn amounts, and the fund confirms these conditions in annual declarations to MAS.

While the fund is on the concession, the annual tiered LBS is computed on the higher of committed capital and actual AUM in DI (Annex 7, paragraph 16). A S$300 million commitment programme therefore sits in the S$300,000 tier from year one, even if only S$60 million has been drawn. A footnote adds that MAS may review selected committed capital arrangements, in particular by year 5 of the S13U award. For the minimum AUM figures that apply to family-backed vehicles, see our note on family office minimum AUM in Singapore.

Worked example: a 10-year private equity sub-fund in an umbrella VCC

Take a newly incorporated umbrella VCC whose first sub-fund is a 10-year private equity strategy with S$180 million of committed capital. The VCC applies under S13U with the closed-end election, and the award starts on the first day of a financial year, so there is no short first year. Because the higher of commitments and AUM in DI stays below S$250 million, the tier is S$200,000 throughout.

IRAS treats an umbrella VCC as a single entity for income tax, and computes income and losses at sub-fund level (e-Tax Guide, paragraphs 2.1 and 5.9). How the closed-end election applies where an umbrella later adds open-ended or differently timed sub-funds is not addressed in the main body of the circular. Settle it with MAS before electing; the example assumes the award covers this one strategy.

Incentive year	LBS incurred (S$)	Cumulative LBS (S$)	Cumulative minimum (S$)	Closed-end test met?	Annual S$200,000 test met?
1	400,000	400,000	200,000	Yes	Yes
2	350,000	750,000	400,000	Yes	Yes
3	300,000	1,050,000	600,000	Yes	Yes
4	250,000	1,300,000	800,000	Yes	Yes
5	200,000	1,500,000	1,000,000	Yes	Yes
6	150,000	1,650,000	1,200,000	Yes	No
7	100,000	1,750,000	1,400,000	Yes	No
8	100,000	1,850,000	1,600,000	Yes	No
9	75,000	1,925,000	1,800,000	Yes	No
10	75,000	2,000,000	2,000,000	Yes	No
11 onwards	Any	Not tested	Waived	Waived	No, unless S$200,000 is spent

Total spending is S$2,000,000 either way; the difference is timing. Under the annual test the fund fails the spending condition in years 6 to 10, and under paragraph 2.4 it cannot claim the exemption for those basis periods. These are often the years in which exits produce the largest gains. Under the closed-end treatment the heavy spending in the investment period carries the harvest years.

The margin is thin. Had year 10 spending been S$50,000, cumulative LBS of S$1,975,000 would fall S$25,000 short, and on our reading of paragraph 2.4 the fund would lose that year’s exemption.

If the fund then uses two one-year extensions and completes its last exit at the end of incentive year 12, years 11 and 12 carry no LBS condition and the award is revoked from the end of the divestment phase.

Which funds should not elect the closed-end treatment?

Any fund that expects to exist beyond 20 incentive years, or that can meet the annual floor without strain, gains little and gives up an exemption that otherwise lasts for the life of the fund.

• Open-ended and evergreen funds, for which a year-20 limit makes no sense.
• Funds whose LBS will comfortably exceed the tier every year, including the harvest period. They gain nothing from an irrevocable election.
• Pre-2025 awards with valuable history. Switching means revocation and a fresh application, with entry conditions tested again.
• Platforms likely to move between tiers. A fund growing from S$200 million to S$400 million in AUM in DI should check Annex 8 on tier changes before relying on early over-spending.
• Continuation-fund strategies, where the divestment-phase trigger needs legal analysis first.
• SFO funds, which are outside the option.

For a broader view of incentive planning for private equity vehicles, see our note on 13O, 13U and VCC issues for private equity funds. Our free tools can help with early cost and timeline planning.

Frequently asked questions

Can a single family office fund use the closed-end fund treatment?

No. Paragraph 3.9 of FDD Circular 05/2026 limits the option to non-SFO funds under the S13O, S13OA and S13U schemes. SFO funds follow their own conditions in section 4 and Annexes 6B and 7B.

Is the election permanent?

Yes. Paragraph 3.11 states that the election to opt into the closed-end fund treatment is irrevocable. A fund that later wants the ordinary annual test back cannot reverse the choice under the same award.

Does the waiver from year 11 remove all conditions?

No. The circular describes a waiver of the LBS condition from the eleventh incentive year. The other conditions of the relevant scheme, including the IP condition and the conditions in the letter of award, continue to apply until the award is revoked.

What happens if cumulative spending falls short in a year?

Under paragraph 2.4, a fund that fails an economic condition such as LBS cannot claim the exemption for that basis period, but can claim it again in a later basis period once all economic conditions are met.

Can a fund awarded in 2023 opt in?

Only by having its existing award revoked and applying for a new one, which would commence on or after 1 January 2025. The new application is assessed against the conditions prevailing when it is made.

Sources

• MAS FDD Circular 05/2026, Tax Incentive Schemes for Funds, 31 July 2026
• IRAS e-Tax Guide, Tax Framework for Variable Capital Companies (Fourth Edition), 22 April 2026
• Income Tax Act 1947, Singapore Statutes Online

Raffles Corporate Services helps fund managers and family offices with VCC incorporation, sub-fund registration, family office set-up and ongoing compliance, including keeping incentive conditions on the annual calendar. For company secretarial support, see Singapore Secretary Services. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 26 October 2026. The Editorial Team, Variable Capital Companies Act.