Lowtax Network

Back To Top

Your Lowtax Account

Private Funds in Cyprus

Internet Incorporate
17 June, 2015

In July 2014 the Alternative Investment Funds Law (“The AIF Law”) was enacted by the Cyprus House of Parliament. The AIF Law updates the funds regime in Cyprus and aligns it with the latest European Union (EU) directives on alternative funds, asset management and investor protection. This presents expanded structuring opportunities for fund promoters which will undoubtedly boost Cyprus’ status as a growing fund centre in Europe.

The law provides for two types of AIFs, namely AIFs without limitations as to the number of investors and AIFs with limited number of persons. The choice of an AIF has a number of significant advantages:

  • No restrictions imposed by the Regulator regarding the type of investments
  • The applications process is fairly simple and not particularly time consuming
  • Subject to the approval of the Regulator, the AIFs can be self-managed
  • AIFs can be set up as umbrella funds with multiple compartments, allowing the management of different asset pools with separate investment policies
  • No withholding tax on dividend distributions and no taxation of capital gains
  • The services provided by the Investment Manager of the fund are not subject to VAT
  • The company legal form of an AIF can take advantage of the double tax treaty network of Cyprus
  • No onerous ongoing reporting requirements to the Regulator
  • Low set up and maintenance costs

AIFs – Main features at a glance

AIFs

AIFs with limited number of investors (up to 75 or fewer)

May be marketed to all investors, including retail, “well-informed” and/or professional investors

May be marketed to “well-informed” and/or professional investors

Unlimited number of investors

Cannot exceed total number of 75 investors

Freely transferable investor shares

Freely transferable investor shares, with the condition that their transfer does not result in having more than 75 investors

Must appoint a global custodian

In certain cases may not be required to appoint a licensed manager or custodian

Subject to a minimum of €125.000 or €300.000 if a self-managed fund

Assets under management do not exceed the AIFMD thresholds of €100 million (including leverage) or €500 million (5-year-lock-up period without leverage)

Investor Classification

A “Well-informed” investor is an investor who is either considered to be a professional investor under MiFID definition, or one who confirms in writing that he is a qualifying investor and has been notified of the risks associated with investing in the AIF.

Features introduced by the law:

  • The AIF Law introduces a Single Regulator, the Cyprus Securities and Exchange Commission (“CySEC”), bringing all investment products, asset managers and investment firms under a single regulatory body
  • The law introduces new structuring options which were the main limitation of the previous legislation, such multiple investment compartments (ie Umbrella Funds), which allows the management of different pools of assets with distinct policies, with each pool of assets being ring-fenced through the set-up of sub-funds
  • Provides the ability to set up an AIF taking the contractual form of a Common Fund
  • It furthermore allows the cross investment between sub-funds.
  • Provides the ability to set up an AIF marketed to Professional Investors and/or Well-Informed Investors. This type of AIF is comparable to the Specialised Investment Funds of Luxembourg, the Qualifying Investor Funds of Ireland and the Professional Investor Funds of Malta
  • It allows the public offering of shares of AIFs, in contrast to the position of the ICIS law, where only private replacements were allowed
  • The role of the depository is no longer reserved only for credit or banking institutions

Tax Regime

Cyprus Tax Laws have been amended to provide further tax incentives for the set up and operation of funds. These amendments provide that:

  • 12.5 % cap on corporate tax, amongst the lowest in the European Union
  • Corporate tax can be reduced to zero, since gains from trading on securities and titles are exempt from tax
  • Dividend income is tax exempt and there is no minimum participation to qualify for the exemption
  • No capital gains tax for gains made on immovable property situated outside Cyprus
  • No withholding tax on outbound dividends for non-Cypriot investors
  • Extensive Double Tax Treaty Network

Our Services
Our fund services include administration, fund accounting, transfer agency, legal and compliance, corporate services. For more information you can contact: Savvas Shiatis sshiatis@oneworldweb.net



About the Author


Internet Incorporate

At Internet Incorporate we have combined years of experience with the objective of client satisfaction and we have carefully designed an exclusive range of strictly personal approach services in order to offer to our clients those solutions needed to achieve their goals the best possible way. www.internetincorporate.com

 

 

« Go Back to Blogs

Blog Archive

Event Listings

Listings for the leading worldwide conferences and events in accounting, investment, banking and finance, transfer pricing, corporate taxation and more...
See Event Listings »