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Benefits of the Cyprus Alternative Investment Funds

30/11/2015

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#caif #funds #financialservices #moi #aleo
As regional and domestic markets continue to expand and fuel economic growth, the funds industry of Cyprus is taking a frontline the global investment environment. In particular more and more investors and managers are choosing Cyprus as their prefered jurisdiction for the establishment and administration of their Alternative Investment Funds.

The Benefits of an Alternative Investment Fund in Cyprus is that it offers a range of legal, regulatory and tax solutions to address and meet the needs of AIF    promoters and investors alike. Services     such as setup and acquisition structuring, fund administration, legal, custody and audit are provided in a wide and customized range, and at competitive costs in comparison to other reputable funds jurisdictions. Cyprus has enacted strict Anti-Money Laundering Regulations,  in line with EU and international standards.

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There are no specific provisions or special modes of taxation in Cyprus tax  law regarding AIFs. Therefore, provided an AIF is structured in the form of a private limited liability company, and its management and control is exercised in Cyprus, it is taxed in the same way as a Cyprus tax resident company. All of the advantages afforded by the Cyprus tax regime will fully apply to the AIF regime.

The below are the main tax advantages enjoyed by an AIF in Cyprus:

  • Exemption from tax on profits from disposal of shares and other financial instruments;    
  • Exemption from tax on foreign dividends received (with some conditions);    
  • No withholding tax on interest and dividend payments made to non-residents;
  • No stamp duties on the subscription, redemption, repurchase or transfer of units;    
  • Dividends distributed or deemed to be distributed by an AIF to Cyprus tax    residents are     subject to 3% SDC (compared to 17% that applies to dividends from normal limited liability companies to Cyprus tax residents);
  • No withholding tax on redemption of units;    
  • Can obtain a Tax Residency Certificate;    
  • Enhanced image and creation of substance. Unlike private companies, an AIF is    subject to regulation and monitoring, all Directors are deemed to be “fit and proper”, investment strategies is documented within a Private Offering Memorandum, and a custodian/depositary and investment manager are typically appointed.
  • A wide network of Double Tax Treaties is in place with more than 58 countries worldwide, securing tax incentives and encouraging the channeling of funds in other countries with nil or low withholding tax rates;    
  • In practice most AIFs generate only exempt forms of income, hence are not subject to Cyprus tax.
For more information on this subject please check Alternative Funds (AIF) contact Mr. Michalis Ioannides or Mr. Andreas Leonidou - Partners of  LLPO Law Firm Cyprus.
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