If you are a Family Office or have a select pool of qualified investors that wish to pool their money to invest in different asset classes with light regulation, fast set-up, low management costs, and entry into the EU, with an excellent reputation, you’re in the right place. You’re looking for a Cyprus Alternative Investment Fund (AIF).

Our appointed experts can assist you in establishing a fund, appoint a manager, and obtain registration with CySEC. We can also help you establish relations with a reputable Cypriot bank in very little time. The AIF fund is an ideal structure for project-funding due to its plethora of double taxation treaties and an excellent pool of management talent.

Cyprus has become one of the top choices for investors seeking beneficial fund solutions.

The CySEC supervises the investment market, including the emerging asset management market. The robust regulatory framework has turned Cyprus into one of the most attractive jurisdictions for investors. Likewise, the country has an aptly prepared competitive workforce filled with competent service providers.

And among that talent is our experts, who are among the top financial advisors in Cyprus. We work with them in all our financial services because they have a proven track record.

Why set an alternative investment fund in Cyprus? 

Flexibility: you can divide your AIF into subfunds and transfer units between investors. This provides you with enhanced expansion and investment strategies.

Unrestricted: No restrictions on the type of investments, and your fund can be self-managed.

Low-tax: Cyprus brings you the best onshore tax optimization. A 12.5% corporate tax rate, with no capital gains or dividends tax, and more than 65 double taxation treaties.

Simplicity: Cyprus AIFs are cost-effective, quick to set up, while they are on a whitelisted, solid regulatory framework. 

What is an AIF?

Let’s begin with some history.

In 2018, the Cypriot Parliament passed an amendment to the law regarding Alternative Investment Funds. AIFs are collective investment funds where the capital is raised from various investors to invest in a particular investment policy from which all investors will benefit. The law was initially passed in July 2014, but its latest amendments made it even more beneficial for those interested.

An Alternative Investment Fund is one that is not included in the European Directive on Undertakings for Collective Investment in Transferable Securities (UCITS). Therefore, some examples of AIFs are hedge funds, equity funds, and real estate funds. In layman terms, an AIF is a fund created for untraditional investment vehicles, such as rare commodities. 

What can AIF do?

• First, different asset types can be included in the investment strategy, meaning it gives investors a ton of flexibility

• They are simple to arrange, manage, and operate and are surprisingly cost-effective

• They have excellent tax incentives (more on that ahead)

The new 2018 AIF Law gave Cyprus a competitive edge. It expanded and strengthened the regulatory framework of the investment fund market in Cyprus. It offers investors access to innovative and protective mechanisms, introducing the Registered AIF (RAIF) to the already-existing Unlimited AIF and Limited AIF.

The new framework allows setting up AIFs in less time and reducing costs. Previously authorized AIF managers can register RAIFs. This means they do not require an additional authorization by the Cyprus Securities and Exchange Commission to start operating. That means that the registration process is reduced from 3-4 months to 2-3 weeks, with reduced registration costs. RAIFs can be converted into AIF later, and there are no minimum share capital requirements, and they can be open-ended or closed-ended.

For investors, especially unregulated investors such as family offices, the Cyprus RAIF is an incredibly attractive investment mean from a potential, legal, regulatory, and fiscal perspective. But you may ask: What legal protection do I have as an investor? Simple. 

The law requires an appointment of an AIF manager that ensures regulatory compliance. Likewise, you can structure an AIF under the Limited Partnership corporate structure, which has legal personality, meaning the AIF would fall under such legal regulation.

• Segregate into sub-funds

• List units on different exchanges

• Allow investors to move their units to other investors

• No capital gains tax on profits from the sale and management of securities

• No taxes on capital dividends

• No tax on deemed dividend distribution for non-tax resident investors

Add that to the fact that the corporate tax rate is 12.5 % and that the country has more than 60 double tax treaties, and Cyprus may seem like heaven.

All these have led the fund management industry in the country to become a beauty to behold. The volume of funds and managed assets have hit record highs almost yearly, leading the assets under management in the country to more than triple from €2.1 billion in 2012 to €7.7 billion in 2018. As a middle point between Western Europe, Eastern Europe, North Africa, and the Middle East, Cyprus has attracted lots of funds and capital investments from those countries. However, new investors from China, India, and Japan are using Cyprus as the opening gate to invest in Europe. It’s also seen as a safe jurisdiction for British asset managers who want to expand or relocate after Brexit.

Types of funds

• Professional investor: One who complies with the regulatory requirements that prove he or she has the experience and knowledge to make the investment decisions

• Well-informed investor: One that doesn’t satisfy the criteria but writes down that he or she is aware of any risks involved in the investment and makes an investment of at least $125k.

• Retail investor: One that doesn’t meet the criteria to be a professional or well-informed investor.

• Limited AIFs: They can have up to 75 professional and/or well-informed investors. These funds don’t have any investment limits or restrictions and can be both internally or externally managed.

• Unlimited AIFs: They can have an unlimited number of investors but have investment limits and restrictions, and can be both internally or externally managed.

• Registered AIFs: They are the newest type. They can only be externally managed. These funds are cheaper to set up than both limited and unlimited AIFs; the annual fees are lower, have an unlimited number of investors with fewer restrictions than unlimited AIFs. 

Now, the capitals industry is a market where the improvement of the Cyprus economy is yet to be felt fully. The capital market is improving with the economy, but the 2013 crisis left a mark with some of the key players who are still recovering from tough years. However, the economy is stable, there are plenty of tax benefits, and we’re talking about a EU member. Thus, many international companies are looking at it as a cost-effective way to diversify their investment portfolios and enter into the EU capital markets.