Cyprus: Offshore Business Sectors
Offshore Financial Services Companies (Investment Funds)
An Offshore Financial Services Company (OFC) used to be an offshore company (although see Offshore Tax Regimes for the general rules governing offshore companies) which engaged in any of the following:
- dealing, buying, selling, subscribing to or underwriting investments
- managing investments belonging to other persons
- giving investment advice to actual or potential investors
- establishing collective investment schemes
The usual Central Bank vetting process for offshore companies also ensured that prospective OFCs were linked to existing investment or financial services companies in well-regulated (meaning in practice, high-tax) countries, although exceptions were made for the internal financial services of respectable companies. The Central Bank imposed additional conditions on OFCs, and usually requires a 'Letter of Comfort' from the foreign parent or associate.
In 2001, as part of preparations to join the EU, Cyprus began to construct a modernised regime for mutual fund operation. Under the Investment Services and Activities and Regulated Markets Law of 2007, which replaced the Investment Firms Law of 2002, Cyprus Investment Firms (CIFs) can be established in Cyprus to provide one or more investment services to third parties and/or perform one or more investment activities under the applicable laws and regulations. Accordingly, an Investment Firm licensed in Cyprus, can be used for the provision of investment services from Cyprus in all EU markets by simply passporting its license, while it can also offer investment services to third countries. CIFs are licensed by the Cyprus Securities and Exchange Commission (CySEC). See Cyprus Law of Offshore for more details on Cyprus CIFs.
Collective investment schemes may be formed under the International Collective Investment Schemes Law No. 47, of 1999. The Central Bank of Cyprus (Bank) which is the regulatory and supervisory authority for Schemes, their managers and trustees, may upon a written application, recognise a company incorporated under the Cyprus Companies Law, a trust created under the International Trust Law or a partnership registered under the Partnership and Business Names Law, as an International Collective Investment Scheme (ICIS).
Under the new legislation, therefore, a Scheme may take one of the following forms:
- International Fixed Capital Company (IFCC)
- International Variable Capital Company (IVCC)
- International Unit Trust Scheme (IUTS)
- lnternational Investment Limited Partnership (IILP)
All four legal types of Schemes, can either be of limited or unlimited duration. See Cyprus Law of Offshore for details of Cypriot collective investment scheme rules.