Alternative Investment Funds in Cyprus

Another reason to take a look at what Cyprus has to offer international business investors

Cyprus is fast becoming one of the top emerging investment fund centres in Europe. The recent modernisation of the legislative and regulatory framework has helped Cyprus emerge as a jurisdiction of choice for Fund Managers and Alternative Investment Funds (‘‘AIFs’’).

The Alternative Investment Funds (AIF) Law

With the enactment of the Alternative Investment Funds Law 124(I)/2018 (the “AIF Law”) in July 2018, (which repealed and replaced the AIF Law of 2014), Cyprus has modernised and significantly enhanced the regime governing alternative investment funds which can be registered and domiciled in Cyprus.

The new AIF Law has introduced more investment structuring possibilities and upgraded the rules for the authorisation, on-going operations, transparency requirements and supervision of Cyprus AIFs, as well as the regulation on the role and responsibilities of their directors, depositaries and external managers. AIFs that are established under domestic Cyprus fund legislation can be sold on a private placement basis or marketed to professional investors across the EU under the Alternative Investment Fund Managers Directive (AIFMD) passport.

The main benefits of the AIF Law can be summarized as follows:

  • Various legal forms available, including tax transparent entities, to meet investor expectations.
  • Ability to create AIFs with unlimited investment compartments (i.e. umbrella funds), each with separate investment strategies 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.
  • Registered AIFs do not require licensing but a mere registration on the regulator’s Register which is achieved within 30 days from submission.

Key Tax advantages of Cyprus AIFs:

  • Exemption from tax on profits from the disposal of securities (it should be noted the Cyprus Tax Authorities have provided a wide definition of what constitutes eligible securities/titles).
  • 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.
  • Notional Interest Deduction (being an annual tax expense calculated as a percentage of equity).
  • An extensive and continuously growing network of double tax treaties.
  • No stamp duty on the issue of units in AIFs.
  • Investors in AIFs which are tax transparent are not deemed to have a permanent establishment in Cyprus.

How we can help you

Our team of experienced and qualified professionals can provide a wide range of services in relation to the formation and licencing, accounting and investor reporting,  and other Fund Administration Services.

For more information on how we may be able to assist you and your business please contact us at  consult@cosmoserve.com  or call (00357) 22379210.

We look forward to hearing from you.

The contents of this article should be considered to be of a general nature only not referring to any particular business.  Before proceeding with any action, please request further advice relating specifically to your business.  We will be very pleased to be of assistance.

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