Currently very few AIF operate in Cyprus. However demand as well as desire for their incorporation and set up and onwards management is growing day by day. An asset for both foreign investors looking to establish a Fund in Cyprus as well as High Net Worth Individuals in Cyprus the AIF, shall become a prominent tool for Corporate Tax Planning in the near future.
HISTORY AND BENEFITS
Derived from the passing of the Alternative Investment Fund Managers Law of 2013 in July, Cyprus harmonized with the EU Directive of 2011 No. 61. (EU Directive 2001/61/EC). Allow me to take the opportunity to detail some of the main benefits in using an AIF:
- Cyprus residents holding units of AIF under certain conditions are subject to a reduced taxation, which totals to just 2,1% of AIF’s profits compared to up to 17% dividend income tax applicable in other cases.
- An AIF can be used for real estate, private equity, leveraged forex to hedge fund trading in exotic financial instruments and investments of any kind, listed or non-listed.
- The price at which an investor may subscribe to the shares of an AIF or have its shares redeemed is based on the prevailing Net Asset Value (NAV), plus or minus a subscription or redemption fee respectively.
- AIF’s can be set up as an umbrella fund, with its sub-funds being segregated portfolios of assets and, accordingly, the assets of a sub-fund belong exclusively to that sub-fund shareholders and shall not be used to discharge directly or indirectly the liabilities or claims against the umbrella or any other sub-fund.
The sub-funds can be denominated in another currency than the currency of the main AIF.
- Every sub-fund can have its own currency, shareholders, assets/liabilities and operate totally independently from the other investors.
- Should the client wish they can appoint an approved and regulated fund manager such as SCSS Fund Management Ltd., which is a licensed AIFM regulated by CySEC which will allow for many synergies and cost efficiencies.
- An approved and licensed AIFM like SCSS Fund Management Ltd will provide the core service of Portfolio Management and Risk Management as well as the ancillary services of Fund Administration, Marketing and Distribution and other activities related to the assets of the AIFs. Thus giving both credibility to the investors as well as safety to the stakeholders.
- Investors in units of the AIF will enjoy confidentiality with the list of unit holders only being kept by the Fund manager.
MAIN CHARACTERISTICS OF AN AIF
- Legal Form: Variable Capital LLC, or Limited Partnership
- Legislation Cyprus AIF Law and Cyprus AIFM Law
- Regulated by the Cyprus Securities and Exchange Commission EU Passporting is available providing that markets’ approval is received
- Taxed in Cyprus
- Deposits are placed with a custodian bank
- Multiple classes of shares without limitation
- The legislation looks to invite investors through a vehicle that can house endless numbers of investors
- All assets welcomed