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Investment Funds

Cypriot Funds are established under a harmonized EU legal framework, and application procedures are undertaken with the Cyprus Securities and Exchange Commission (CySec); the authority in charge of supervision and regulation of investment funds & Fund Managers in Cyprus. In brief, Cypriot laws on investment funds provide for the following:

Cypriot Alternative Investment Funds (AIFs)

Cypriot registered AIFs can be sold on a private placement basis or marketed to professional investors across the EU under the Alternative Investment Fund Managers Directive (AIFMD) passport.

AIFs can be structured in one of the following forms:

  • Fixed Capital Investment Company
  • Variable Capital Investment Company
  • Investment Limited Partnership
  • Common Fund (AIF with unlimited number of persons only)

Registered AIFs (‘RAIFs’)

A RAIF is a special type of AIF that is not subject to authorization from CySec but is regulated through its external licensed manager (AIFM).

A RAIF can be set up as:

  • A mutual fund
  • An investment Company
  • A partnership

Undertakings for Collective Investment in Transferable Securities (UCITS)

UCITS Funds are collective investment portfolios that invest in transferable securities and/or other liquid financial instruments, which operate on the principle of risk – spreading, and provide low investment risk and high level of investor protection.

 A UCITS fund may be set up in one of the following legal forms:

  • Common fund (CF)
  • Variable capital investment company (VCIC).

Fund Taxation

  • No capital gains on the disposal of securities
  • Notional Interest Deduction (NID) on new equity reducing the effective interest tax
  • No subscription tax on net assets of funds
  • No tax on dividends received
  • No withholding taxes on dividend payments from Cyprus to non-residents
  • No thin capitalization rules
  • No VAT on fund management services to AIF
  • Low corporate tax rate
  • Low operating costs
  • Each AIF compartment taxed as a separate taxpayer
  • Interest received is taxed at the corporate tax rate
  • Double Tax treaty network
  • Tax favourable re-domiciliation & employment scheme

Foreign Investor Taxation

  • No taxation on redemption of units
  • No deemed dividend distribution tax
  • No withholding taxes on dividend payments from Cyprus to non-residents

Resident non-domiciled Investor Taxation

  • Flat rate tax for individuals with performance based variable remuneration, not applicable to all employees.
  • No withholding taxes on dividends via non-domicile status
  • No taxation on redemption of units
  • No withholding tax if the investor is a company

Resident domiciled Investor Taxation

  • Flat rate tax for individuals with performance based variable remuneration, not applicable to all employees.
  • Withholding taxes on dividends for investors with resident & domicile status
  • No taxation on redemption of units
  • No withholding tax if the investor is a company
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