FUND REGISTRATION IN CYPRUS
Funds are one of the most transparent mechanisms for making a profit for investors who are interested not in daily business, but in the passive increase of their funds.
Such corporate instrument is traditionally used as an alternative to bank financing, deposits, real estate investments or other large-scale investments. The main advantage of investment funds is that they can pool the capital of many participants (investors) and, with the help of professional managers, make this capital work effectively.
For such purposes, Cyprus is the most suitable jurisdiction. This jurisdiction has flexible legislation to attract collective investment and the ownership of several types of securities. That is why investing in a Cyprus fund is a fairly profitable investment option.
LEGISLATION
The establishment of funds in the Cyprus is governed by the Alternative Investment Funds Law 2018 (AIF Act).
Fund types:
In Cyprus, it is possible to create the following types of alternative investment funds:
- Alternative Investment Fund with a limited number of members (AIFLNP);
- Alternative Investment Fund with an unlimited number of members (AIF);
- Registered Alternative Investment Fund (RAIF).
But, the most suitable form for foreign investors is RAIF - Registered Alternative Investment Fund, which has no restrictions on the number of investors and does not require a special license.
FEATURES OF RAIF:
- The activities are fully regulated externally by the managing licensed AIFM manager
- Unlike other forms, RAIF does not need to obtain a special license from the Cyprus Securities and Exchange Commission (CySEC), but it does need to be entered into the CySEC Register
- The investment is established exclusively by professional or experienced investors
- The investment of the investment funds takes up to 6 months
TAXATION
The income of a Cyprus investment fund is taxed according to the same principle as for classic companies, at the income tax rate of 12,5%.
Cyprus does not impose a subscription tax on the net assets of the fund, does not levy tax payments when paying dividends to non-residents.
In addition, the country has a huge number of Double Taxation Treaties with other countries, which can significantly reduce tax costs when transferring interest, dividends, royalties and other types of income.
Funds can be established using different structures: sub-funds, different number of investors and different amount of shares. That is why the corporate structure is developed on an individual basis for particular requirements and purposes.
ALTERNATIVE INVESTMENT FUND (RAIF):
- Share capital - no deposit requirements.
- Investments - the value of assets under the management of the fund in the first year of operation shall be at least 500 000 EUR. Investors attract the assets.
- Investors - at least one qualified investor. There is no quantity limit. Investors purchase shares.
- Manager is an external licensed manager AIFM (Alternative Investment Fund Manager) who manages the fund and is responsible for it.
- Administrator is a mandatory position that reports to a manager. The administrator keeps monetary and internal accounting.
- Depository is a local professional participant in the securities market that stores certificates of securities belonging to the fund. The appointment of depository is mandatory.
- It is mandatory to appoint also auditor and legal advisor.
- Shareholder - at least one natural or legal person, without restrictions on residency.
- Director - at least one natural or legal person, without restrictions on residency, but preferably a Cypriot.
- Secretary - only a Cypriot resident, can be a natural or legal person.
- Accounting - it is mandatory to submit financial statements annually, regardless of whether the fund was operating or not.
- RAIF is required to have a registered office in Cyprus.
- Prohibited Activities - RAIF cannot establish monetary policy, act as a fund for granting loans or borrowings, or engage in banking and insurance activities.
Taking into account all the requirements it is impossible to register an investment fund in Cyprus without professional assistance. If you are interested in this service, please contact our lawyers for advice:
+38 (098) 737-88-88
We will help you create an alternative investment fund in Cyprus on the most favorable terms.
