The Cyprus Alternative Investment Fund (AIF) scheme is an extremely efficient vehicle, helping companies realise corporate savings. It is also an excellent way to plan for and protect wealth for future generations and generate profits for clients in a regulated way.
Investing in Cyprus provides the possibility to access a range of funds, including one of the most attractive tax regimes in Europe.
01 Setting up a Fund in Cyprus
Cyprus has strengthened its appeal with international investors as a global domicile for investment funds and asset management, with assets predicted to quadruple to 20 billion within the next 4 years.
Under the full authority of the European Union, regulation and legal provisions are put in place to protect investors money invested in an AIF. Within these parameters, excellent tax incentives can be availed for funds, fund managers and individual investors.
“An investment hub for investors accommodating ground-breaking fund structures, as incisive as those in Luxembourg and Ireland.”
02 Significant tax benefits
- 0% subscription tax on the net assets of the fund.
- 0% capital gains tax, except for Cyprus real estate.
- 0% capital gains tax from the sale of overseas immovable property.
- 0% dividend taxes for profit extraction from non-domiciled persons.
- Corporate tax rate of 12.5% on profits, which can be reduced to as low 2.5% with Notional Interest Deduction (NID).
- According to the provisions of the law each compartment of an AIF is a separate taxable entity.
- An AIF taking the form of an investment company can benefit from the double tax Treaties in place between Cyprus and over 60 countries (including India).
- 0% tax on the redemption of shares.
- 0% tax on transfer of shares to either members of a family, or if you sell to a third party, except in the case the fund holds Cyprus real estate.
- 0% inheritance tax.
- 0% withholding tax on dividends distributions for foreign investors.
New provisions in the Cyprus Income Tax Laws have enhanced the tax framework for Fund Managers on the island.
The carried interest accrued to individual taxpayers from exercising employment for an AIFM or internally managed fund, or delegated company, at the option of the individual taxpayer is subject to taxation at a flat rate of 8% with a minimum tax liability €10,000 per annum for a 10-year period.
Income tax exemptions dependent on annual remuneration apply to expatriates.
Services are not subject to VAT.
03 Benefits and Requirements of specific structures
An AIF is a collective investment undertaking that can be made up of traditional asset classes such as equity and real estate, as well as non-traditional asset classes.
AIFLNPs (AIFs for Limited Number of Persons)
- Popular with HNWI’s and family offices, due to their simple ownership structure, flexibility and protection granted.
- Open or closed-ended with no minimum initial capital requirement.
- No minimum initial capital requirement.
- Can be self-managed in case of companies, or externally managed by an investment firm.
- Can be exempt from depositary for less than 5 investors and Assets
- Under Management (AUM) below €5 million.
- Only available to professional, well-informed investors up to a total of 50.
- Minimum capital requirement if self-manged is €50,000.and annual audited reports to CySEC.
- Can take the form of a Fixed or Variable Capital Investment Company.
- Cannot be listed/traded on a stock exchange.
- AIFs (Alternative investment Funds for an unlimited number of persons)
AIFs (Alternative investment Funds for an unlimited number of persons)
- Ability to ‘passport’ fund units to professional investors in the EU.
- Can be marketed to an unlimited number of persons including retail investors.
- Open or closed-ended.
- Can be listed on the stock exchange but can be listed on the stock exchange.
- Can take the form of an Investment Company (IC), Limited Partnership (LP) or Common Fund (CF).
- Obligated to appoint depositary.
- Required to apply principles of risk diversification.
- Filing annual audited and half-yearly unaudited reports to CySEC and unit holders.
- Requires a fully licensed investment manager, AIFM licensed in the EU is required, can also be self-managed.
- Minimum initial capital requirement of €125,000 if self-managed or €300,000 for self-managed AIF/AIFM, no requirement if externally managed.
RAIFs (Registered AIFs)
- Fast track fund launch available.
- Addressed to well informed/professional investors.
- Supervised at the level of the AIFM appointed in Cyprus or the EU.
- Open or closed-ended and no investment restrictions apply.
- No minimum capital requirements.
- Appointment of depositary is required.
- May be listed on the stock exchange.
- Legal structures: Common Fund (CF),Fixed and Variable Capital Investment Company, Limited Partnership (LP).
- Can be set up with multiple compartments.
"Because our clients investment decisions matter to us we take a proactive approach in shaping them."
We utilise our key global partners to assist in the cost effective set-up and compliance of any AIF Fund under the provisions of the Republic of Cyprus.
Millwood Kane performs an initial client profiling and recommend the ideal course of action ensuring the upkeep of your overall objectives. Our commitment in preserving long term relationships, ensures we understand our clients’ position in detail and are able to safeguard interests by making the right recommendations.
In association with our acclaimed partners, Millwood Kane takes you through the process of choosing the right legal form for your AIF, preparation and processing of the application package for submission to the regulator and follow up during the processing.
Our partners then ensure a complete package of services pertaining to your fund, ranging from fund administration to corporate, audit and tax services.