Cyprus UCITS Fund
Cyprus has adopted the Undertakings for Collective Investment in Transferable Securities (UCITS) IV Directive.
The Undertakings for Collective Investment in Transferable Securities (UCITS) are investment funds that are established in the European Union and must comply with the EU Directive, currently IV. The Directive aims to allow collective investment schemes to operate all over the European Union.
The UCITS (Undertakings for Collective Investment in Transferable Securities) are regulated funds that can be offered to the public at large. These funds can be sold across the EU subject to a brief registration procedure with each country regulator. At least 90% of the investment portfolio of a UCITS must consist of listed securities or recently listed transferable securities.
The provisions of the UCITS IV Directive allow for two legal forms of open ended funds to be created, mutual funds and variable capital investment companies (VCIC). Both are regulated by the Cyprus Securities and Exchange Commission (CySEC).
Main provisions for the UCITS Fund:
- The fund can take the form of a mutual fund or variable capital investment companies (VCIC)
- The minimum capital for a new fund is:
- €125,000 if Management company’s sole purpose is management of UCITS
- €200,000 if UCITS appoints an external manager (per sub fund if applicable)
- €300,000 if UCITS is a self-Managed VCIC (per sub fund if applicable)
- The fund needs a custodian which should be a local institution (usually a bank)
- Both the Mutual Fund and the Variable Capital Investment Company may be set up as a single fund or as an umbrella fund consisting of multiple compartments, each with a different investment policy and different share classes, depending on the needs of the investors to whom the fund is distributed.
Note that as per a UCITS IV Directive, it is possible to form funds in Cyprus and manage them from an approved institution outside Cyprus (in another EU country). Additionally existing cross border marketing provisions are now simplified to a regulator to regulator notification which permits a UCITS to be marketed in another member state within 10 days after the receipt of the notification letter with key investor information, in order to be able to assess the risks associated with the specific UCITS.
The pass porting regime of management companies across the EU applies to UCITS managers only and not to management companies of other types of funds such as the AIF’s. So UCITS managers, which also manage non UCITS local funds, will have no passport under the UCITS IV Directive for the non UCITS part of their activity. This is where the AIFMD steps in and provides the passport for the non UCITS activities making it possible to consolidate management remotely; at least in certain instances (the AIFMD (non UCITS) passport is only available for sales to professional investors).
Contractual Funds, Variable Capital Companies, International Unit Trusts, International Variable Capital Companies
Share capital or equivalent
Upto 100 for a Private fund
Service Providers Required
- 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