US Partnership Representative Services for Singapore Variable Capital Companies (VCCs)
How to Determine Whether a Singapore VCC Is Required to File Form 1065
To determine whether a Singapore VCC would be required to file U.S. Form 1065, you would need to consider its activities that generate U.S. taxable income or have a U.S. tax filing obligation. Below are some examples of that may trigger the requirement to file Form 1065:
- S. Trade or Business: If the VCC is engaged in a U.S. trade or business, it may be subject to U.S. tax and would generally need to file Form 1065.
- S. Source Income: If the VCC earns income from U.S. sources, such as rental income from U.S. real property or dividends from U.S. corporations, it could be subject to U.S. tax on that income and have a filing requirement.
- S. Investors: If the VCC has U.S. investors, they may trigger U.S. tax reporting obligations. The VCC may need to file Form 1065 to report the income or losses allocated to U.S. partners.
Given their knowledge and experience with your funds, your tax advisor would be ideally suited to advise you if an IRS Form 1065 filing is required for your fund(s) for year-end. If the VCC is required to file an IRS Form 1065, you will need to name a Partnership Representative and Designated Individual on the tax form.
US Partnership Representative requirements
The US Partnership Representative must have a substantial presence in the United States. A substantial presence requires the Partnership Representative to have:
- a US taxpayer identification number
- a US telephone number and a US street address
- be available to meet in person with the IRS at a reasonable time and place
If the Partnership Representative is an entity, the partnership must also appoint an individual who meets the substantial presence requirements to act as the “designated individual” of the entity serving as Partnership Representative.
Challenges in not appointing a partnership representative
If a partnership does not appoint its own partnership representative (“PR”), the IRS can select any person to serve as PR with the power to bind the partnership and all its partners.
Although there is no strict technical requirement in the Regulations that a PR be a US citizen, as a practical matter this is a reality because it can be challenging for a non-US citizen to obtain a TIN number.
Strict eligibility requirements to elect out
There are strict eligibility requirements to opt out of the new regime, which includes the number and type of partners in a partnership and notification requirements to each partner. Virtually all hedge and private equity partnerships will not be eligible to elect out of the new audit rules due to not meeting the eligible partner requirement. Should the fund be eligible to elect out, this election must be made in a timely filed tax return. Partnerships should carefully consider the eligibility requirements with their tax advisor to determine the viability of opting out of the new regime.
The Waystone Partnership Representative solution
Waystone provides a comprehensive, competent and qualified US Partnership Representative solution that meets all IRS requirements and protects the interests of the partnership. Accordingly, the PR and the Designated Individual acting on behalf of the Waystone Entity Partnership Representative shall not, without the prior written approval of the General Partner:
- engage advisors
- schedule or attend meetings or conference calls with the IRS or advisors, unless additionally attended by the General Partner or such advisors as the General Partner shall appoint
- file requests, protests, court filings, settlements, or other documents with the IRS or courts
- propose, consent to or otherwise enter into any material agreements with the IRS (including waivers or extensions of statutes of limitations and settlement agreements)
- make any election on behalf of the Partners or Partnership.
If you have any questions about this requirement and how it may affect your business, please reach out to your usual Waystone representative or contact us below.