What Is a Special Purpose Vehicle (SPV)? Definition & Benefits

When you set up a new project through your main company in Singapore, every risk flows back to your core business. If that project fails, its debts and liabilities sit on your company’s books and may even show up in your financial statements. A Special Purpose Vehicle, when set up properly, can help isolate those risks, benefit from specific tax or GST concessions, and shield your main operations from volatility tied to a single venture.

That said, SPVs aren’t risk-free or zero hassle. You need to understand when they make sense, what legal, tax, or regulatory obligations will apply, and how to put one together correctly.

This article provides insight into SPVs: what they are, what benefits and pitfalls to expect, and a clear step-by-step guide with ACRA, IRAS, and MAS. By the end, you'll have a grounded view on whether an SPV fits your situation — and how to implement one without unintended consequences.

A Special Purpose Vehicle (SPV), also called a Special Purpose Entity (SPE) or Special Purpose Company (SPC), is simply a separate company created for one specific purpose, such as holding property, managing an investment, or reducing risk to your main business. 

In practice, SPVs are common in property deals, employee share schemes, and startup fundraising, where investors pool funds into one vehicle to take equity together.

In Singapore, most SPVs are incorporated as Private Limited Companies because they are straightforward to register and provide limited liability protection. Depending on the purpose, however, alternatives such as trusts, limited partnerships, or Variable Capital Companies may be used, each suited to different types of projects or investments.

If you’re planning a project, investment, or holding arrangement with some risk attached, using an SPV can help shield your primary business in the following ways:

One key advantage of an SPV is that it operates as a separate legal entity from its parent company.

This separation, called “ring-fencing”, ensures that the SPV’s assets and liabilities are distinct from those of the parent company. In practice, this means insolvency, financial troubles, or legal claims affecting the parent company generally do not impact the SPV, and vice versa. This independence allows businesses to manage specific projects or investments without putting their wider operations at risk.

It’s like having a separate bank account for your vacation money: if something happens to that account, the funds in your primary bank account are still safe and accessible.

In Singapore, many companies often use Employee Equity-Based Remuneration (EEBR) schemes, such as share options or share awards, to reward staff. An SPV can be set up to handle these schemes, making the process more transparent and helping the company claim tax deductions.

Here’s how it works: the SPV buys or issues shares and then transfers them to employees when they vest. The company can usually claim a corporate tax deduction for the cost of those shares, minus anything the employee pays for them.

Notably, the deduction is recognised when the employee receives the shares, not when the SPV first buys them.

In Singapore, SPVs linked to Real Estate Investment Trusts (REITs) and certain Registered Business Trusts (RBTs) can enjoy Goods and Services Tax (GST) concessions. These allow S-REITs and qualifying S-RBTs listed on the Singapore Exchange to claim GST on expenses tied to their business and their SPVs, even if the trust is not GST-registered.

There is also a concession for SPVs set up only to raise funds for these trusts. As long as the money raised is on-lent back to the REIT or RBT and used for business activities, the SPV can claim GST on its expenses. This reduces tax costs and helps ensure that GST does not eat into investor returns.

Asset securitisation is a way to turn things like mortgages, loans, or other receivables into tradable investments. The assets are moved into an SPV, which then issues securities backed by the income from those assets. Investors buy the securities, giving the original company fresh funding, while the SPV handles the repayments and investor returns.

In Singapore, securitisation is mainly used by banks and large corporates that need to raise capital or manage risk. To support this, the government offers the Approved Special Purpose Vehicle (ASPV) scheme, which grants the following benefits:

• An income tax exemption on qualifying income from securitised assets
• GST expense recovery at a rate now aligned with those for licensed full banks, instead of a fixed 76%
• Special support via the ASPV (Covered Bonds) sub-scheme for SPVs that hold a “cover pool” under MAS Notice 648

Even though SPVs can offer substantial structuring, tax, and protection benefits in Singapore, they are not without trade-offs. It’s important to understand these so you don’t run into unexpected costs or risks.

Setting up an SPV in Singapore is like running a separate company. It needs its own incorporation, bank account, financial statements, independent accounting, statutory filings, governance and board oversight.

All these must be maintained separately from the parent company, including regular audits or reviews, and sometimes special licensing or regulatory reviews, depending on the SPV’s purpose.

For large corporations, this overhead may be absorbed because they often have dedicated legal, finance, or compliance teams or can outsource specialised roles. For smaller businesses or startups, the administrative, legal and accounting costs can add up. Over time those costs may outweigh the advantages if the SPV’s purpose is narrow or low-volume.

One of the main risks of SPVs is that they can obscure the true financial position of the parent company.

Because an SPV is a separate legal entity, its assets, liabilities, and cash flows are recorded independently from the parent company. In complex corporate structures with multiple SPVs, it can be difficult for stakeholders such as auditors, investors, or regulators to see the full picture of financial health or exposure.

This lack of transparency can be exploited, intentionally or not. For example, in the United States, Enron famously used SPVs for off-balance sheet financing to move debt out of sight and present inflated earnings to investors.

Even when SPVs fully comply with legal and accounting rules such as IFRS (International Financial Reporting Standards), the separation of records can still make it challenging to detect financial risks until they become serious problems.

Evergrande was once among China’s largest property developers, with vast land holdings and a peak valuation in the tens of billions of dollars. But by 2021, the market had cooled, and regulatory tightening made borrowing much harder.

Reportedly, Evergrande used SPVs to buy its own bonds when open-market bond issuance was difficult; insiders said these bonds were later sold at yields as high as 18%, compared to roughly 6% in the broader market. Through the SPVs and the resale of the bonds, Evergrande created an illusion of investor confidence and short-term liquidity, masking the actual cost of financing and the company’s deepening debt.

Still, those tactics did not erase the underlying debt burden, and Evergrande began defaulting on its debts. By the end of 2022, Evergrande’s liabilities had swollen to about 2.43 trillion yuan (around USD 340 billion) before regulators stepped in. As of mid-2025, its liquidators had sold only about USD 255 million in assets, while creditors had submitted claims of about USD 45 billion.

Analyst estimates suggest bondholder recoveries will be very low, offering little comfort to those who believed in Evergrande’s appearance of strength.

Setting up an SPV is generally the same process as registering a new company from scratch, be it a Private Limited Company or a Limited Liability Partnership, unless the SPV is used for regulated activities like issuing covered bonds or undertaking structured finance, in which case additional regulatory requirements apply under MAS and other rules.

Here are the main steps:

1. Define clearly what the SPV will do (for example, holding assets, raising finance, managing investor funds). Doing this first helps you choose the correct SSIC business activity code, determine if licences or regulatory approval are needed (such as under MAS), and understand what tax or reporting obligations may apply.
2. Register the company with ACRA via BizFile by supplying the company name, description of business activities (using an SSIC code), shareholder/partner details, directors/managers information (note that at least one director for a Singapore company needs to be a local resident), and a registered local address. A company secretary must be appointed within six months of incorporation. 
3. Open a separate business bank account in the SPV’s name and set up independent accounting records, financial reporting, and bookkeeping, so its finances are legally distinct from any parent or related company. You may also explore neobank options as an alternative to traditional banks.
4. Register with IRAS for corporate income tax. If the SPV expects revenues or transactions that exceed GST thresholds, or will issue securities, raise funds publicly, or participate in regulated financial activity (for example, covered bonds per MAS Notice 648), verify whether GST registration or specific approvals or licences are required.

SPVs are powerful tools in Singapore for isolating risk, leveraging tax and GST incentives, and structuring specific financial or investment projects. But they’re not a shortcut. Their advantages come with responsibilities: clear governance, careful compliance (with ACRA, IRAS, and MAS), and ongoing administrative effort.

If you decide to set up an SPV, getting the incorporation, accounting, and regulatory foundations right from the start saves you trouble later. As a licensed company incorporation service provider in Singapore, Statrys provides an all-in-one package (company incorporation, nominee director, company secretary, and registered address), so you can focus on the business rather than paperwork.