Cyprus has been one of the first EU member states to transpose the Alternative Investment Fund Managers Directive into national law, as a result it now offers an effective and flexible legislative framework for all types of Investment Funds. Furthermore, the smooth collaboration between the competent authorities and the service providers in the Republic of Cyprus, guarantee the swift execution of the services provided to the clients.
Cyprus Investment Funds in Cyprus enjoy several benefits, including but not limited to the following:
- Few or No restrictions on types of Investments: Cyprus Securities Exchange Commission (“CySEC”) – The Regulator imposes almost no restrictions on the type of investment of an AIF in Cyprus.
- Self-Managed Funds: Both AIFs and AIFLNPs have the option to be internally managed, as a result there is no requirement for appointment of a Fund Manager, leading to saving ongoing costs and efficiency.
- Stock Exchange Listing: AIFs and RAIFs in Cyprus may be listed in Cyprus and/or any other Stock Exchange or listing of the fund in international information services.
- No Capital Gains Tax: Investment Funds in Cyprus are exempted from the payment of any Capital Gains Tax (GGT) on disposal or redemption of fund units.
- Fast Set-Up: The establishment of an AIF in Cyprus is relatively straight forward with an estimated time for obtainment of license, up to 6-8 months and specifically for a RAIF, up to 8-12 weeks.
- Umbrella Funds: Investment Funds in Cyprus may be established as umbrella funds, meaning that segregated sub-funds with a variety of different investment policies, type of assets and investment strategies may be created.
- No withholding Tax on Dividends: Dividends distributed to the unit holders of an Investment Fund in Cyprus, are exempted from tax or any withholding tax.
- No Value Added Tax (“VAT”) on Fund Managers: Value Added Tax is completely exempted from the Management Services provided by a Fund Manager to an Investment Fund in Cyprus.
There are several key taxation benefits/advantages which an Investment Fund and its unitholders (shareholders) may enjoy:
- Tax Exemption on profits generated by the disposal of securities: *Important to be noted that the Cyprus Tax Authorities have provided a wide definition of what constitutes eligible securities/titles.
- Tax Exemption on dividend income (subject to certain conditions).
- No withholding tax on repatriation of dividends, interest and royalties to non-residents.
- 12.5% corporate tax rate, being among the lowest within the European Union.
- Eligible to use the Notional Interest Deduction (NID) benefit.
- An extensive network of Double Tax Treaties.
- No Stamp Duty on the issuance of units in an Investment Fund.
- Investors within Investment Funds, which are tax transparent, are not deemed to have a permanent establishment in the Republic of Cyprus.
Apart from all the above ‘Practical’ and ‘Taxation’ reasoning to set-up your Fund in Cyprus, there are various direct and indirect external factors that enhance the choice of Cyprus, such as the High Quality of Life, its access to the EU and High Growth Markets, the High Quality Workforce as well as the Low Cost of Conducting Business.
Our Firm can advise you further, not only on how and why to setup your Investment Fund in Cyprus, but as well on the how-to setup the structure of your Investment Fund, in order to reflect sufficiently your type of investments and optimize the appropriate results.