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Cyprus Alternative Investment Funds (AIFs) | Private Funds

SERVICES / Cyprus Funds / Alternative Investment Fund (AIF)

Main advantages of Cyprus Funds

 - Competitive setting-up and on-going costs structures and funds in the EU
-  Favourable tax regime in the EU, especially for non-Cyprus residents
-  Combination of reasonable regulations, flexibility and tax incentives
-  EU member state compliant with EU laws
-  Developed infrastructure, highly qualified professionals and minimum formalities
-  Wide and efficient network of legal, accounting and banking services
-  Hedge fund and hedge fund managers location
-  AIFS, UCITS can be listed on CSE and other recognized EU stock exchanges
-  Re-domiciliation in and out is possible

The key new features of the Cyprus’ fund regime are:

-  the AIF Law introduces a single regulator
-  multiple investment compartments
-  provides the ability to set up a Cyprus AIF taking the contractual form of a Common Fund
-  it furthermore allows the cross investment between sub-funds
-  provides the ability to set up an AIF marketed to Professional Investors and/or Well-informed Investors
-  it allows the public offering of shares of AIFs

Types of Cyprus Alternative Investment Funds (AIFs)

AIFs with unlimited number of persons AIFs with limited number of persons
- may be marketed to either “well-informed” or “retail” investors

- can take the forms of a Variable Capital Company (VCC) or Fixed Capital Company (FCC), Common Fund (CF) or Limited Partnership (LP)

- maybe be listed/traded on a recognized stock exchange

- they must appoint a global custodian

- subject to minimum capital requirements of €125.000 (€300.000, if self-managed)

- retail schemes are subject to investment restrictions for the purpose of risk spreading and ensuring liquidity
-limited number of investors to 75 and may only be marketed to “well-informed” investors

 - may take the form of a Variable Capital Company (VCC) or Fixed Capital Company (FCC), or Limited Partnership (LP)

- not subject to investment restrictions

- under certain circumstances the scheme is not required to appoint a licensed manager or a custodian

- Assets Under Management (“AUM”) do not exceed €100 mn (including leverage); or €500 mn (closed-ended without leverage)

AIF Manager Requirements

A VCC and FCC may be set-up as self-managed, or it may be externally-managed by a third party appointed. An LP and CF must always appoint a third party manager.
Eligible providers include a credit institution, MiFID Investment firm or other entities subject to prudential regulation. If AIF is managed by an AIFM, custodian must be located in Cyprus or other EU member state by July 2017.
If AIF is managed by any other entity custodian must be located in Cyprus or any other member state or third country which Cyprus has signed a cooperation agreement.

The administrator must be based in Cyprus. Exemption maybe obtained if both the Manager and Custodian are based in Cyprus.

Tax for Cyprus Funds 
Cyprus is increasingly becoming a favoured destination of choice in EU for Fund Managers and Management Companies seeking new locations, for the following reasons:

-  30 percent cap on personal income
-  12.5 percent cap on corporate tax, amongst the lowest in the European Union
-  corporate tax can be reduced to 0 percent as gains from trading in securities and shares are tax exempt
-  flexible regulations and light supervision
-  substantially lower operating costs than comparable EU fund centres

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