The sector has recorded an impressive growth over the last few years and is strengthening the country’s status as a convenient European gateway for investment funds. The volume of funds and assets undermanagement have hit record highs proving that interest in Cyprus as a business and investment base runs strong, as assets under management (AuM) have more than tripled from €2.1 billion in 2012 to €6.8 billion in June 2019. With the current growth rates sustained, AuM could reach €20 billion in the next five years.
Cyprus is offering various advantages in the funds industry such as the cost effectiveness, flexible and solid legislation and convenient geographical location. Cyprus is attracting funds and investors from Europe, Asia and Middle East.
Why Investment Fund in Cyprus?
Cyprus operates under the EU Legal framework and is in full compliance with the EU Directives allowing investors and fund managers to operate under a secure environment. In addition, Cyprus has experienced professionals and well-established firms with years of experience. Cost effectiveness and the attractive tax legislation make the country a great place to set up a fund.
Attractive Fund Tax
Location
Cost effectiveness
Investor friendly tax regime
Fast growing sector
Single Fund Regulator – CySEC
Taxation benefits of Alternative Investment Funds.
- 12.5% corporate tax rate
- Exemption from tax on dividend income
- No withholding taxes on repatriation of dividends, interest and royalties to non-residents
- Exemption from tax on profits from the disposal of securities
- Extensive double tax treaties network
- No stamp duty on the issue of units in AIFs
- Investors in AIFs are not obliged to have a permanent establishment in Cyprus
Types of Investment Fund in Cyprus.
AIF – Alternative Investment Funds
The key benefits of AIF’s.
- Regulatory framework in line with relevant EU directives.
- Cost-efficient and fast setup
- Simple management and operation
- Investment strategy can include a number of asset classes.
- Tax incentives and advantages
- Full transparency with reports towards investors
- Supervised by the Cyprus Securities and Exchange Commission (CySEC) regulatory authority.
An AIF can take the following legal forms and may be established with limited or unlimited duration.
FCIC. Fixed capital Investment company
VCIC. Variable capital Investment company
- Limited Partnership
- Common Fund
The AIF in Cyprus can be setup with two types.
AIF with unlimited number of persons.
AIF with limited number of persons (50).
RAIF – Registered Alternative Investment Funds
Registered alternative Investment funds are the newest fund vehicle lunched in 2018.
Although RAIF’s are regulated under CySEC, no licensing is required. There is no limitation on the number of investors. The fund has to be externally managed and there is no minimum share capital requirement.
The key benefits of RAIF’s.
- No licensing required
- No investment restrictions
- Multiple compartments possibility
- Addressed only to well-informed and professional investors
- No minimum capital requirements
UCITS – Undertakings for Collective Investment in Transferable securities
One of the most effective asset management tools available because of their strong regulations and high investor security. UCITS are established and authorised under the EU Legal framework.
UCITS can have the below legal forms:
VCIC – Variable Investment Company
CF – Common Fund
The key benefits of UCITS in Cyprus:
- Efficient and fast setup
- Cyprus UCITS can be marketed and sold in EU member states
- Cost efficient operation
- Low risk investment
- Possibility for “Umbrella Funds” setup with different sub-funds and share classes
- Fully transparent Investments and monitoring possibility (Net Asset Value)
- Investors can repurchase or redeem their units from the assets of the UCITS
- Regarded as one of the most efficient asset management tools internationally
Alternative investment funds features.
| AIF | AIF – With limited or Unlimited Investors | RAIF | |
| Authority | CySec | CySec | CySec |
| Legal structures | Common Fund (CF), Variable Capital Investment Company (VCIC) , Fixed Capital Investment Company (FCIC), Limited Partnership with or without legal personality (LP) | Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), Limited Partnership with or without legal personality (LP) | Common Fund (CF), Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), Limited Partnership with or without legal personality (LP) |
| Investors | Unlimited | Up to 50 (with look through provisions) | Unlimited |
| Addressed to | Professional and/or Well-Informed Investors and Retail Investors | Only to Professional/Well-Informed Investors | Only to Professional/Well-Informed Investors |
| Investment restrictions | Apply for liquidity and risk diversification | Non Applicable | Non Applicable |
| Minimum Capital Requirement | Self-managed: €125.000
Externally managed: N/A |
Self-managed: €125.000
Externally managed: N/A |
Not Subject to Minimum Capital Requirement |
| Minimum AUM (within 12 months) | €500.000 | €250.000 | €500.000 |
| Fund management | Self-managed (in the case of a company or a limited partnership with separate legal personality) or with the appointment of a fund manager | Self-managed (in the case of a company or a limited partnership with separate legal personality) or with the appointment of a fund manager | Always required to appoint an external fund manager |
| Manager | AIFM licensed in the EU, UCIT Manager licensed in the EU, MiFID Investment Firm, Cyprus Mini-Manager (to be enacted), EU Sub-threshold AIFM | Third country manager, UCIT Manager licensed in the EU, MiFID Investment Firm, EU Sub-threshold AIFM, AIF not investing in financial instruments: a Company incorporated solely for the purpose of managing the specific AIF, which does not hold any license for portfolio management (to be replaced by the “Mini-Manager” regime). | Externally managed by an AIFM established in Cyprus or within another EU Member State, RAIFs structured as limited liability partnerships may also be externally managed by managers other than AIFMs (i.e. Investment Firms, UCITS Management Companies, sub-threshold AIFM (Mini-Manager). In such event, the RAIF must necessarily be established as a closed-ended scheme and invest more that 70% its assets in illiquid investments. |
