Alternative Investments Funds (AIFs) are entities regulated by law that collect funds from several investors with the main aim to invest these funds collectively in accordance with a pre-determined investment policy and for the benefit of the investors.
Cyprus offers one of the most competitive and attractive alternative investment funds legal frameworks since it offers low registration and administration costs as well as an attractive taxation regime.
The legal forms that can take an AIF are the following:
- Fixed or Variable Capital Investment Company,
- Limited Partnership (with or without a separate legal personality), or
- Mutual Fund (not available for AIF-LNP or RAIF).
MAIN ADVANTAGES OF THE AIFs:
AIFs are very flexible in their investment policy, especially they can invest in real estate, private equity, listed equity, renewable energy, shipping, healthcare sectors and many others sectors.
Among others, AIFs can:
- be established as umbrella funds including different investment compartments;
- invest anywhere in the world;
- be addressed to well-informed/professional clients and sometimes to retail clients;
- issue redeemable preference shares to investors with specific lock-up periods;
- be open-ended or close-ended;
- take the form of a common fund, partnership or investment company with fixed or variable capital;
- be addressed either to a limited or unlimited number of persons;
- be either internally managed or externally managed depending on their type;
- be managed by Investment Firms.
It is further noted that the Registered Alternative Investment Funds (RAIFs) do not require any authorization from Cyprus Securities and Exchange Commission (CySEC), and they are authorised and supervised by already approved Alternative Investment Fund Managers.
WHY DOMICILE AIF IN CYPRUS?
Significant growth in the fund industry in Cyprus has occurred in the past few years, both in terms of the value of assets and terms of the number of funds and fund managers, resulting in the establishment of Cyprus as one of the major EU fund jurisdictions.
Overall, Cyprus is the most flexible and cost-efficient fund jurisdiction in the EU and it is a member of the European Securities and Markets Authority (ESMA).
Further, there is an option to make public offerings of shares/ units of AIFs, a possibility of Listing to stock exchanges AMD A Possibility of outsourcing some services.
TAXATION OF AIFs:
- The corporate income tax for an AIF that has the form of an investment company is 12.5%, the lowest in the EU;
- Exemption from tax on profits from the disposal of securities;
- Exemption from tax on dividend income (subject to certain conditions);
- No withholding taxes on repatriation of dividends, interest and royalties to non-residents;
- Available of the use of Notional Interest Deduction (being an annual tax expense calculated as a percentage of equity);
- Cyprus has a very extensive network of avoidance of double taxation with many countries.
- No stamp duty on the issue of units in AIFs;
- Investors in AIFs which are tax transparent are not deemed to have a permanent establishment in Cyprus.
HOW SCLAW TEAM CAN HELP:
- Full legal support for the establishment and authorization of any type of AIF;
- Tailored advice based on your specific circumstances in order to achieve a cost-effective solution.
- Preparation of the full application file for authorization of any type of fund and drafting of the necessary incorporation documents in order to be in accordance with the Cyprus law;
- Communication with CySEC and follow-up on the application;
- Full legal and accounting support during the establishment and operation of the AIF;
- Professional Services for the management of any type of fund through our cooperation with our associates and partners;
- Services for the preparation of all of the documentation for the subscription to the participating shares of the fund, allotment of shares, redemption transfer etc);
- Preparation and maintenance of investor registers;
- Categorization of investors and due diligence for the onboarding of the investors;
- Outsource services for the proper regulatory compliance of the fund;