In July 2014 Cyprus has introduced the Alternative Investment Funds (AIF) in replacing the International Collective Investment schemes (ICIS) law 1999. An  AIF is a collective investment undertaking raising capital from investors with a view to investing it in accordance with the defined investment policy for the benefit of the investors. The  AIFs consist items such as, contractual structure where investors participate as co-owners of assets, or umbrella structures with multiple investment sections, allowing the management of different asset pools with separate investment policies and with ring-fenced assets and liabilities, or public offerings of AIF shares/units or listing of securities issued by AIFs, growing base, liquidity, marketability and transparency. The AIF law and regulatory framework is aligned with the latest EU directives on asset management, investor protection and transparency. This development is considered as a progress for fund marketers by expanding structuring options. Cyprus AIFs may be traded on a private placement investors across the EU under the AIFM “passport”. An AIFM once authorised by Cyprus Securities and Exchange Commission (CySEC) can market AIFs he manages to professional investors in all other the EU Member States using the simplified way regulator-to-regulator notification as there is no need to pursue permission from each Member State and comply with each EU member state different national laws.

An AIF can take the following legal forms:

  • Fixed Capital Company (FCC)
  • Variable Capital Company (VCC)
  • Limited Partnership (LP) , and
  • Common Fund (CF)

All four types of AIFS may be established with limited or unlimited duration of time.

Alternative Investment Fund with Unlimited Number of Persons which:

  • may be marketed either to well-informed or retail or professional investors
  • have investor shares which are freely transferable
  • may be listed, and in the case of AIF marketed to Retail investors, may be traded
  • are subject to minimum capital requirements equal to EUR 125.000 or EUR 300.000 in the case of self-managed fund
  • are subject to certain investment restrictions for the purpose of risk spreading and ensuring liquidity
  • appoint a global custodian

Alternative Investment Fund with Limited Number of Persons which:

  • may not exceed the total number of 75 investors
  • may be marketed only to well-informed investors
  • are not externally managed by an AIFMD authorised manager and/or their assets under management do not exceed the AIFMD thresholds, being (i) EUR 100 million (incl. leverage) or (ii) EUR 500 million (5 year lock up period without leverage)
  • have investor shares  which are freely transferable only if their transfer does not result in the AIF having more than 75 investors
  • In certain cases may not require to appoint a licenced manager or a custodian

Three classifications of investors:

  1. Professional Investor

An investor who has the experience and expertise to make his investment decisions and assess the risks involved. An investor to be reflected as a professional client must comply with the criteria set in the Markets in Financial Instruments (MiFID) 2004/39/EC

2. Well-informed Investor

    1. A Professional Client, as such term is defined in the MiFID; OR
    2. One that meets the following  two requirements:

(a) Confirms in writing that he/she is a qualified investor and that he/she is aware of the risks involved with an investment in the relevant AIF; and

(b)   (i) investment made in AIF is at least EUR 125.000 OR

(ii) expertise, experience and knowledge in evaluating an investment opportunity properly, have been certified by a licensed bank/credit institution, an authorised investment firm or an authorised Management Company

3. Retail Investor: An investor, other than well-informed, i.e. which does not meet the requirements above

Benefits

  • Flexibility: Any asset can be included in the investment strategy of the AIF (under certain conditions)
  • Transparency: Annual audited and half yearly reports to be sent to the CySEC and the investors (contain financial statements, information on borrowing, portfolio information, NAV)
  • Tax Incentives: Cyprus AIF benefit from significant tax incentives / Establishment for taxation purposes can very difficult be challenged
  • Regulation: EU directives / business friendly jurisdiction (no onerous reporting requirements)
  • Low set-up and operational costs: Easy and cost efficient to set up and maintain Cyprus funds

Tax Benefits

  • No subscription tax on net assets of a fund
  • Exemption from tax on profits from sale of shares and other instruments
  • No withholding tax on income repatriation or dividends paid to investors
  • No capital gains tax on disposal of shares/units by the holders
  • Tax exemption on capital gains from the sale of immovable property located outside Cyprus

An extensive network of Double tax Treaties in place with more than 50 countries globally

We are offering such services and our team has extensive experience and  knowledge of the relevant procedure and setup of AIFs.