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Looking for investment funds in Europe? Cyprus is your top choice!

calendar 6/26/2020 8:00:00 AM
author Danilo Financial Licenses
There is an island immersedin the Mediterranean waters, which has been a much-sought jewel for the Greeks, Assyrians, Romans, Crusaders, Venetian, Ottoman, British, and many more.

That place is Cyprus.

The island is such a beauty that it's where Aphrodite, the Greek goddess of love, was born from the foam of the sea in Paphos, her main center of worship.

One of the many famous folk tales in Cyprus is the story of Saint Mamus, a Christian who the Romans jailed for tax evasion. Nevertheless, when the Romans saw him rescuing a sheep by taming a wild lion; they were so impressed that decided to let him go.

Cyprus has its own Patron Saint of zero-tax since agent times, and it continues to be true to its legends.

This country is not only a top tax planning destination but also has some of the best investment funds offerings in Europe.

If you are a family office or have an exclusive pool of investors that want to invest in different vehicles without excessive regulation, quick setup but with robust legislation, reduced management costs, and gaining entry to the EU, Cyprus is your place.

An Alternative Investment Fund (AIF from now on) in Cyprus provides you with:

  • Flexibility, as you can segregate your AIF into sub-funds and transfer of units between investors, which allows varied expansion and investment strategies.
  • No restrictions regarding the type of investments.
  • The possibility of self-management.
  • One of the lowest corporate tax rates in the EU (12.5 %).
  • No capital gains or dividend tax.
  • More than 65 double taxation treaties.
  • Cost-effectiveness.
  • Sound regulatory framework

 

About Cyprus

Cyprus is a full EU member, and it's the third-largest island in the Mediterranean. It has a privileged geopolitical location that puts it a short fly awayaway from all European, North African and Middle Eastern capitals.

The island enjoys 340 days of sunshine, and it's been a top Mediterranean cruise destination for decades thanks to its otherworldly beaches and archeological sites.

And the lure of the island has only increased with the construction of villas, yacht clubs, water sports attractions, and the safekeeping of its historical sites.

But Cyprus is way more than a fun, beautiful, and cultured place. The spirit of Saint Mamus still dwells in Cyprus. Its inhabitants consider effective tax planning a sacred duty, and the island offers a wide array of tax incentives for individuals and companies who decide to reside in Cyprus.

This has made Cyprus the EU country with the largest expat community, which comprises almost a quarter of its population, whith a strong presence of British, Russians, and Middle Easterners.

If you truly believe in freedom and want to achieve your financial and personal goals, Cyprus is the place you're looking for.

And, particularly, you're looking at a Cypriot fund. Our experts in Cyprus can help you establish a fund, name a manager, register with the CySEC (Cyprus Securities and Exchange Commission), and quickly open a bank account with a robust Cypriot bank.

The AIF fund is ideal for investors all over the world as it will benefit from Cyprus' strong double taxation network and will offer swift access to the European market.

The fund management industry in Cyprus has grown exponentially. The volume of funds and assets break records each year, almost tripling managed assets in Cyprus from €2.1b in 2012 to €7.7b in 2018. Its strategic location makes it a middle point between Western and Eastern Europe, North Africa, and the Middle East, attracting dozens of funds from all these regions.

Cyprus is probably the most emerging fund and asset management market in the EU. The European investment fund market is of €725b and has €12 trillion in assets under management. Many investors from all over the world want to gain entry into the European market and know that Cyprus is one of the easiest and most reputable ways to do so.

Also, establishing a fund in Cyprus is relatively simple and straightforward. It gives you the peace of mind of knowing the fund is well-regulated in a reputable jurisdiction, which has attracted plenty of investors from China, India, Russia, and Japan who use Cyprus as their entryway to the European market.

 

Why Cyprus? Five reasons to set up an investment fund in the home of Aphrodite

Terrific tax system

Cyprus offers one of the lowest corporate tax rates in the EU, at a meager 12.5 %. Furthermore, the tax system is territorial, meaning you only pay taxes on your Cyprus-sourced income. There are no capital gains or dividend distribution taxes.

Also, the island has one of the most beneficial non-dom regimes, which offers a 50 % tax reduction for incomes over €100k and a full defense tax exemption for 17 years. Moreover, to attract fund managers, Cyprus introduced a special 8 % tax rate on the variable employment remuneration of fund managers for ten years, as long as their taxable income exceeds €10k. If foreigners decide to relocate in Cyprus, they will also benefit from:

  • The above-mentioned non-dom regime.
  • 20 % of the taxable remuneration is tax-exempt for five years if it's less than €100k.
  • The non-taxable threshold is €19.5k, one of the highest in the EU.

Flexibility

AIFs can be divided into subfunds, can include different assets, and units can be transferred between investors. All this provides you with enhanced flexibility and possibilities for your investment strategy to a point that is rare in most of the EU.

Simplicity

The AIFs are simple to arrange, manage, and operate and are cost-conscious.

Passporting rights

Your Cypriot fund comes with EU passporting rights, which means you can market and sell them in any other EU member country without additional application or licensing process, which reduces time, stress, paperwork, and money. If you intend to expand your fund business across Europe, Cyprus is the best entryway.

Modern regulatory framework

Cyprus comes with full compliance with the EU directives and has a first-level, robust yet flexible regulatory framework. All this amounts to straightforward legal procedures, easiness to monitor your investments, and full transparency meaning your AIF is a reliable, steady investment. The legal framework is generally pro-business and meant to protect investors.

 

What is an alternative investment fund?

AIFs are a type of investment fund that is not included in the European Directive on Undertakings for Collective Investment in Transferable Securities (UCITS). Thus, AIFs include hedge funds, funds of hedge funds, private equity, real estate funds, and venture capital funds.

In simpler terms, an AIF is a fund created for non-traditional investment vehicles such as real estate, rare commodities, and such.

The Cypriot Parliament passed a new AIF law in 2018 that improved Cyprus as a fund jurisdiction giving it a competitive legal framework as it created a new form of AIF, the Registered Alternative Investment Fund. The CYSEC regulates and supervises the financial market and has an excellent reputation as a fair regulatory entity thanks to its first level legislation.

The 2018 law added the Registered AIF (RAIF) to the two types of AIF that already existed: Unlimited (UAIF) and Limited (LAIF).

Let's explain each one of them:

Limited AIFs: These funds can have a maximum of 75 professional and/or well-informed investors.They don't have investment restrictions and can be both internally or externally managed.

Unlimited AIFs: They have an unlimited number of investors. However, they also have investment restrictions. They can also be internally or externally managed.

Registered AIFs: They are the newest type of AIF. They can only be externally managed but are cheaper and easier to set up and manage than both limited and unlimited AIFs. They also allow an unlimited number of investors with fewer restrictions than unlimited AIFs.

All these funds have three types of investors:

Professional investor: This investor checks all the boxes regarding compliance requirements that demonstrate he has the experience and knowledge to make the decisions about the investment fund.

Well-informed investor: This investor doesn't fill the criteria but establishes he's aware of any risks regarding the investment. He must invest a minimum of $125k.

Retail investor: An investor that doesn't meet the criteria for professional or well-informed investor.

The RAIF has one terrific benefit: the registration process is reduced from 3-4 months, as with the UAIF and LAIF, to a mere 2-3 weeks. How? Because RAIFs can be registered by AIF managers duly licensed by the CySEC, meaning they don't need any extra authorization and reduces registration costs. Moreover, they can be both open or close-ended and have no minimum share capital requirements.

This makes the Cyprus RAIF a terrific opportunity for family offices and other unregulated investors from a legal, regulatory, fiscal, and investment perspective. It offers solid protection as it requires the appointment of an AIF manager for regulatory compliance, and you can structure your AIF under an LC, which has separate legal personality and offers limited liability.

Cyprus has become one of the best fund jurisdictions in the EU because there are no investment type restrictions. Moreover, they are incredibly flexible as they can 1) Be self-managed, 2) Set up subfunds, 3) Become a part of a larger fund. All these allow different expansions and investment strategies. And, on top of that, you have a friendly tax system that offers benefits for funds such as:

  • No capital gains tax on revenues from the sale and management of securities.
  • No capital dividend tax.
  • No deemed dividend distribution tax for non-resident investors.
  • A special 8 % tax rate on the variable employment remuneration of fund managers for tenyears, if their taxable income exceeds €10k.

You can see its main differences and particularities right here:

 

LAIF

UAIF

RAIF

Management Type

Externally

Managed

Internally

Managed

Externally

Managed

Internally

Managed

Externally

Managed

Legal Forms

Mutual Fund

Fixed or Variable Capital Investment Company

Mutual Fund

Fixed or Variable Capital Investment Company

Limited Partnership, with or without legal personality

Fixed or Variable Capital Investment Company

Limited Partnership, with or without legal personality

 

Limited Partnership, with or without legal personality

Physical Office

The manager's offices can be used

Required

The manager's offices can be used

Required

Not required

Number of

Directors

Minimum 2

Minimum 4

Minimum 2

Minimum 3

Minimum 2

(1 ExecutiveDirector)

(2 ExecutiveDirectors)

(1 Executive

Director)

(1 Executive

Director)

(1 Executive

Director)

Number of

Investors

Unlimited

No more than 50

Unlimited

Investment

Restrictions

Investment Restrictions apply depending on the investment strategy and type of investors

No requirements or limitations

Limited rules mayapply

Capital

Requirements

No initial requirement, €500,000 within the first 12 months following authorization

€125,000 initial requirement, €500,000 within the first 12 months following authorization

No initial requirement, €250,000 within the first 12 months following authorization

€50,000 initial requirement, €250,000 within the first 12 months following authorization

No initial requirement, €500,000 within the first 12 months following authorization

AssetsUnder Management

The assets under management should reach the threshold for AIFM registration set in the AIFM law being:

The assets under management should reach the threshold for AIFM registration set in the AIFM law being:

No limitations

·  €100 mil withleverage, or

·  €100 mil withleverage, or

·  €500 mil without leverage and a lock up period of 5 years

·  €500 mil without leverage and a lock up period of 5 years

Portfolio Management

Bythemanager

Bythe AIF board

Bythemanager

Bythe AIF board

Bythemanager

Unittransferability

No limitations

Freely if the number of investors is less than 50 and the potential transferees are Professional and/or Well - Informed Investors

Freely if the potential transferees are Professional and/or Well - Informed Investors

CySEC Application

Fees

€1,800 plus €400 for each additional investment compartment

€1,300 plus €300 for each additional investment compartment

€400 plus €100 for each additional investment compartment

CySEC

Annual

Fees

€1,800 plus €400 for each additional investment compartment

€1,300 plus €300 for each additional investment compartment

€400 plus €100 for each additional investment compartment

 

Who are we, and what can we do for you?

We have more than two decades working with NTL, a prestigious international firm,in order to provide family offices, high net worth individuals, and investors around the world with the best financial, investment, corporate, banking, and immigration solutions.

Our core value is freedom. We want to offer you the tools to invest, live, and work freely and whenever and wherever you want.

We know Cyprus is one of the best jurisdictions in the EU. It's a perfect entryway for non-EU investors offering a sound and modern legal framework with fair rules and terrific tax planning possibilities.

Cyprus is one of the emergent fund jurisdictions in Europe. Its tax system, regulatory framework, and flexibility have put it at the top of the list of many investors.

And we can help you register and license an AIF in Cyprus.

We have a top multidisciplinary team on this gorgeous island. That's why we offer varied financial licensing, Forex, immigration, corporate, and fund services in Cyprus.

 

Want to know more about our services in Cyprus? Check out our Country Focus.

 

Time frame for setting up a fund

The estimated timeframe for setting up a fund is as follows:

  • Preparation of the application package: 1-2 months.
  • CySEC application evaluation:
  • The maximum response time is six months.
  • The average assessment and response time is two-three months.
  • If the CySEC asks for additional information, the time may extend somewhere between two weeks and one month.
  • Generally, it takes around four to five months after submitting to get a response without problems.
  • Remember that RAIFs have a quicker setup process, but they must be registered by duly licensed AIF managers.

Each type of fund has a different licensing process and a different application package.

 

What we offer

To know the specifics, please contact us, and we'll help you with:

  • Accounting and tax planning. Choosing the right fund structure for you.
  • Preparing a tailor-made application package with all necessary documents depending on your needs and the requirements of the CySEC.
  • Advice on improving the application including legal compliance and advising on any clarifications demanded by the CySEC during the application.
  • After authorization, we offer license maintenance services, notifying you of any regulatory requirement updates and possible adjustments you may need to your processes and procedures.
  • Collaborating with all fund primary players.
  • Coordinating with lawyers, auditors, and all necessary service providers.
  • Advice on safekeeping requirements for all your assets.
  • Dealing with regulatory authorities post-licensing.
  • Board representation.
  • Project and relationship management.
  • Appointing members of our team as the risk manager, compliance officer, or internal auditor.

Cyprus is one of the best fund jurisdictions in Europe. It can help you take your asset diversification strategy to the next level. Want to set up an investment fund in Cyprus? Contact us today

Inquire now! 

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