Why Consider Cyprus as the Location for an Alternative Investment Fund?
An Alternative Investment Fund (AIF) is a collective investment which raises external capital from a number of investors with a view to investing it for the benefit of those investors. It does not need to be licensed as an Undertaking for Collective Investment in Transferable Securities (UCITS).
Alternative investments include hedge funds, managed futures, real estate, commodities and derivative contracts.
Main Characteristics
The main features of a Cyprus AIF are detailed below:
- Provides multiple investment compartments which allow the management of different pools of assets.
- Common funds where investors may participate as co-owners of the assets of the AIF, and are only liable for the amount that they have contributed.
- Funds with different investment policies, investing, for example, in assets other than financial instruments, such as real estate, are Provisions allow for the appointment of a Depositary*, a role which can be undertaken, not only by a credit institution, but also by a legal entity.
- AIFs can be listed publicly on stock markets.
*A Depositary does not need to be appointed if the total assets of the AIF are less than €5 million and the AIF has 5 or fewer investors.
Why Consider Cyprus for the Establishment of an AIF?
Cyprus has the legislation, appropriate structures and experienced professionals to establish and provide the structuring, legal, audit and custody services to meet the needs of AIF investors. Strong Anti-Money Laundering regulations are also in place in Cyprus, in line with EU and international standards.
In addition, Cyprus has one of the lowest corporate income tax rates in the EU and the Eurozone at 12.5% and a total tax exemption exists on gains from the disposal of shares.
An application to establish an AIF should take approximately 5-6 months from the date of submission to the Cyprus Securities and Exchange Commission (CySEC).
What are the Advantages of Cyprus AIFs?
The key advantages of Cyprus AIFs are:
- No restriction on the types of investment.
- No withholding tax on dividend distributions and no capital gains tax.
- Low establishment and maintenance costs.
- The corporate form of an AIF can take advantage of Cypriot double tax treaties.
- AIFs can be set up as umbrella funds with multiple compartments.
Legal Framework
The Alternative Investment Funds Law of 2014 adopts a modern approach and provides the option to establish AIFs with multiple compartments.
Types of AIF:
- unlimited number of individuals. May be marketed to (a) retail or (b) well-informed and/or professional investors*;
- limited number of individuals, a maximum of 75. May be marketed to well-informed and/or professional investors*.
*A professional investor is an investor who is considered to be a professional client as defined in the Markets in Financial Instruments Directive.
* A well-informed investor is an investor not considered to be a professional investor.
How Can Dixcart Assist?
The Dixcart office in Cyprus can assist in establishing an AIF, as follows:
- Preparing the application and liaising with CySEC and the Registrar of Companies (where needed).
- Providing legal support during the registration and administration processes.
- Providing administrative services.
- Fully meeting the compliance obligations and reporting to the Regulator.
Additional Information
Please speak to your usual Dixcart contact or to the professional staff at the Dixcart office in Cyprus for additional information regarding Cyprus AIFs and the advantages that they offer: advice.cyprus@dixcart.com.
