AIF is a collective investment undertaking raising external capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and that has not been authorized as a UCITS.

Key Features

The Alternative Investment Funds (AIF’s) are non-UCITS funds and despite the fact that are not complement with EU funds are widely recognized on international basis subject to compliance with the relevant national securities law in each different case.  AIF’s can be sold on a private placement to the investors.

The newly introduced enactment allows three types of AIFs to be registered in Cyprus:

  • AIF’s available to the public in the form of a company, a limited partnership or a mutual fund.
  • AIF’s available to experienced investors in the form of a company, a limited partnership or a mutual fund.
  • AIF-LNI with limited number of investors in the form of a company or a limited partnership.

Some of the advantages enjoyed by an AIF are:

  • Tax exceptions on profits from disposal of shares and other financial instruments and foreign dividends
  • No withholding tax for interest and dividend payments made to non-residents and on redemption of units
  • Advantage of the double taxation treaties of Cyprus with other jurisdictions
  • Tax Residency Certificate can be obtained
  • Dividends distributed or deemed to be distributed by an AIF to Cyprus tax residents are subject to 3% Special Defense Contribution (SDC), compared to 17% that applies to dividends from normal limited liability companies to Cyprus tax residents.
  • No formal requirement to appoint local Directors.
  • Under certain conditions no requirements to appoint an external investment manager and a custodian.

Legal Requirements

Requirements

Description

General

  • Corporate  vehicle permitted

Contractual Funds, Variable Capital Companies, International Unit Trusts, International Variable Capital Companies

  • Local physical office required

No

Share capital or equivalent

  • Minimum subscription

€125,000 for professional investors

  • Minimum investors

Upto 75 for a limited fund

  • Minimum capital

€200,000 or €300,000 if self-managed

Directors

  • Minimum number

2

  • Corporate directorship allowed

Yes

  • Local director required

No

Service Providers Required

  • Custodian

Yes (local)

  • Fund manager/Investment manager

Yes

  • Fund administrator

Yes

  • Auditors

Yes (local)

Tax Treatment

  • No capital gains on disposal of securities
  • Interest received is taxed at the corporate tax rate of 10%
  • There is no tax on dividends received from local companies or international companies
  • Absence of withholding taxes on dividend payments from Cyprus to non-residents
  • Reduced deemed dividend distribution tax to Cyprus Resident investors to 3% from 15%

Duration to Set Up

About 3 months

Distinctive Benefits of Licence

  • Competitive, modern and transparent legal and regulatory framework
  • Benefits from the strong European Union Fund’s Legislation
  • Numerous recognised fund service providers established in Cyprus, ranging from global names to local independent operators servicing all types of funds at very competitive rates
  • Advanced and attractive tax environment

The Valsen Advantage

  • End to end comprehensive service
  • Speedy and efficient service
  • Expert advice on structuring options
  • Dedicated ongoing compliance support
  • Extensive network pool of service providers