Cyprus is a reputable route for investments into and out of Europe in addition to having an up-to-date and extensive framework. Additionally, it offers convenient access to China, India, the CIS, Europe, and other rising countries, offering distribution options to a wide range of customers. As a regional and global business hub, it also benefits from several other comparative advantages, including a robust network of professional and financial service providers, a wide range of important options for international tax planning, strong sectoral cooperation, and a contemporary, transparent legal and regulatory environment.

Pursuant to the research by Invest Cyprus, there is little question that the nation’s economy will be impacted more broadly by this sector’s sustainable growth. The finance business is essential to promoting Cyprus’s advantages since it facilitates and encourages increased investment inside and between EU members. The Cyprus Securities and Exchange Commission (CySEC) has released statistics that show the industry for Cyprus funds has grown significantly:

• 11,6 bn EUR reached AuM of UCIs
• 8,6% increase compared to the second quarter of 2021
• 363% overall increase from 2016

The social and political stability of Cyprus, along with a practical legal and regulatory framework that is always changing, are the cornerstones of the investment fund industry’s expansion.

According to the statistical research performed by The Cyprus Investment Funds Association (CIFA) the following data reflects the reality of the Cypriot Fund market:

• €11.1 bn Assets Under Management
• €9.6 bn – Net Asset Value
• 322 – Management Companies and UCIs

Categorization of Funds

In general, investment funds in Cyprus fall into one of two categories: alternative investment funds (AIF) or undertakings for collective investment in transferable securities (UCITS).

UCITS can be either a common fund (CF) or a variable capital investment company (VCIC), and they are controlled by the Open-Ended Undertakings for Collective Investment (UCI) Law 2012 (as modified).

The Alternative Investment Funds Law of 2018 (as modified) governs AIFs. In principle, AIFs may be formed under the following legal structures:

• Common fund (CF) – not applicable for AIF LNP
• Variable capital investment company (VCIC)
• Fixed capital investment company (FCIC)
• Legal partnership with or without legal personality (LP)

Furthermore, AIFs can be categorized as the following:

• AIF– Alternative investment funds that can be offered to an unlimited number of investors, and are subjected to greater regulation and oversight under the AIF regime.
• AIF LNP – Alternative investment funds with a limited number of persons. There is a limit on the number of investors allowed, currently 50.
• RAIF – Registered alternative investment funds are not subjected to authorisation and licensing procedures in Cyprus. Registration with the Cyprus Securities and Exchange Commission (CySEC) is required.

Regulatory requirements

According to the reporting and supervision requirements, the following are the respective overseeing authorities:

• The independent public supervisory body Cyprus Securities and Exchange Commission (“CySEC”) is in charge of overseeing transactions involving transferable securities and the investment services industry in the Republic of Cyprus. It is the regulatory and supervisory body that, among other things, has the authority to issue operating licenses to Cyprus Investment Firms (i.e., firms that comply with MiFID regulations), UCITS and UCITS Management Companies, and Alternative Investment Funds (AIFs).
• The Cyprus Investment Funds Association (CIFA) was founded in 2013 with the goal of serving as the voice of all professionals and legal organizations involved in the investment funds business in Cyprus, as well as their collective voice.

Taxation consideration

The funds which were registered in the form of a company are taxed according to the standard companies’ taxation procedure, where a corporate income tax at the rate of 12,5% is imposed on taxable profits and the tax exemption is applicable to the income from dividends, capital gains from the sale of property overseas, gains from the sale of securities, etc. other forms of incorporated entities are not treated as the companies under Cyprus tax legislation.

We at S. Dionysiou & Partners LLC advise on various matters related to corporate complete legal guidance and assistance on the registration and memorandum matters. For any further information, you may contact us at info@dplawcyprus.com.

This content is solely for general information purposes. None of the information herein should be relied on or substituted for specific professional advice regarding a particular matter or situation and no person should act or refrain from acting on the basis of the information contained in this brochure without first obtaining advice from an attorney.

We are not engaged in rendering legal services or advice by providing the information contained in this brochure.