Alternative Investment Funds in Cyprus

Alternative Investment Funds in Cyprus

Overview

A Cyprus investment fund is a vehicle that allows investors around the world to raise capital through various financial instruments. The passing of the Alternative Investment Funds Law in July 2018, ensures that Cyprus not only remains competitive in the international scene as a funds jurisdiction, but that it also serves in providing even more flexibility to establish Cypriot funds and fund management entities. Cyprus aims to develop a world class fund sector and mark its position as a growing domicile for investment funds and asset management. The continuous upgrading of the legal framework is expected to raise investors confidence in the jurisdiction

 

Structure of Alternative Investment Funds In Cyprus

Cyprus Investment Fund may be established with limited or unlimited duration and can take the following legal structures:

(a) A Fixed (FCIC) or Variable (VCIC) investment company in the legal form of a limited liability company
(c) Mutual fund (CF), namely a contractual pool of assets without legal personality;
(d) Limited partnership (LP) with or without legal personality.

 

The new Alternative Investment Funds Law

The AIF Law of 2018, which replaced the AIF Law of 2014, has introduced the possibility to create Registered AIFs in Cyprus and in addition fine-tuned the other types of AIFs. The RAIF is not subject to the supervision of CySEC or any other supervisory authority. A RAIF can only be externally managed by an Alternative Investment Fund Manager (“AIFM”) with certain exceptions for RAIFs with illiquid assets

A key benefit of the RAIF is that it reduces significantly the required time for the launching of such fund. Within one month from the date of filing of duly completed “notification pack”, CySEC will proceed to include the AIF in the list of Registered AIFs. The quick and cost efficient launch of a RAIF enhances the suite of type of funds that can be established in Cyprus. The RAIF will still be considered as ‘AIF’ by virtue of the Law and there are no restrictions in its investment strategy

 

The main provisions of the Alternative Investment Funds Law can be summarised as follows:

  • Ability to create AIFs with unlimited investment compartments (i.e. umbrella funds), each with a separate investment strategy and asset pools.
  • The units of AIFs can be listed on various stock exchanges.
  • There are various options available in relation to the appointment of an Investment Manager and Depositary, providing maximum flexibility.
  • Investor units are freely transferable.
  • The AIF-LNP is limited to a maximum of 50 investors.
  • Possibility to create Registered AIFs, which do not require licensing, hence time to market is significantly shortened.

 

Why choose Cyprus – Main advantages of Cyprus Alternative Investment Funds Law

  • Increased flexibility as a number of asset classes can be included in an AIF investment strategy
  • Low set up and maintenance costs
  • Modern regulatory framework fully in line with relevant EU directives
  • it may be open- or closed-ended;
  • the number of the investors is unlimited;
  • Subject to the approval of CySEC, the AIF can be self-managed
  • Can be set up as umbrella funds with multiple compartments, allowing the management of different asset pools with separate investment policies
  • Investors are offered a quite favorable tax regime and tax planning opportunities, as there are no specific tax requirements with respect to the Cypriot AIFs and UCITS. The above investment funds enjoy all of the tax advantages offered by the Cypriot tax legislation. which include but are not limited to:
  • Double taxation treaties with more than 60 countries;
  • Foreign dividends are exempted from taxation (subject to some conditions); and
  • No withholding taxes on repatriation of dividends, interest and royalties to non-residents.

 

Tax Advantages of the Cyprus Alternative Investment Funds

  • Exemption from tax on dividend income (subject to certain conditions).
  • No withholding taxes on repatriation of dividends, interest and royalties to non-residents.
  • 12.5% corporate tax rate, being among the lowest in the EU.
  • No permanent establishment is created by investors for their investments in common funds in Cyprus and as a result, the said income from such investments is taxable only in their tax residence country.

How our law firm may assist you

Christos Praskevas LLC law firm is among the providers experienced in the licensing and administration of Cyprus Investment Funds and cost efficient in delivering professional alternative investment fund services in Cyprus.

  • We can assist you with selection the appropriate form of Alternative Investment Fund
  • Setting up the entity to be authorised;
  • Drafting, submitting and promoting the AIF Application for Regulatory Approval
  • Assisting with client enquiries regarding the authorisation process,
  • Communicating with CySEC on behalf of the client.
  • We can administer a wide range of alternative investment funds through our dedicated fund administration division
  • Arranging for the issue, transfer, allotment, conversion, redemption and/or purchase of shares, in accordance with the fund’s constitutional documents.
  • Drafting relevant AML policies, Investors’ KYCs and Acceptance Procedures
  • Staffing solutions and assistance in screening suitable candidates for Portfolio Managers, Risk Managers, Compliance Officers and other key personnel;
  • Internal audit services as per the requirements of the regulatory framework
  • Full legal support.

For more information visit our web page about Investment Funds in Cyprus

For further information on establishing an AIF in Cyprus, please contact Mr. Christos Paraskevas at info@paraskevasllc.com or call us at +357 22432800

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