Alternative Investment Fund (AIF) in Cyprus

The enactment of the Alternative Investment Funds Law of 2014 (“AIF Law”) marked the beginning of a new era and strong opportunities for Cyprus in the fund industry. The new AIF Law came to harmonise the Cyprus legal framework with the European legislation in an attempt to enhance its competiveness and place the country as an important player in the field of alternative investment funds.

The new AIF Law provides for the requirements for the establishment of alternative investments funds (“AIFs”), their operation and supervision as well as setting the framework for the key persons involved in the management and operations of such funds.

The Law provides for two types of Alternative Investment Funds (AIFs), namely AIFs without limitations as to the number of investors and AIFs with limited number of persons. The choice of an AIF has a number of significant advantages:

  • No restrictions are imposed by the Regulator regarding the type of investments;
  • The application process is fairly simple and not particularly time consuming;
  • Subject to the approval of the Regulator, the AIFs can be self-managed;
  • AIFs can be set-up as umbrella funds with multiple compartments, allowing the management of different asset pools with separate investment policies;
  • AIFs without limitations as to the number of investors can be listed on Cyprus Stock Exchange and other recognized EU stock exchanges;
  • No withholding tax on dividend distributions and no taxation of capital gains;
  • The services provided by the Investment Manager of the fund are not subject to VAT;
  • The ‘‘Company’’ legal form of an AIF can take advantage of the double tax treaty network of Cyprus;
  • No onerous ongoing reporting requirements to the Regulator;
  • Low set up and maintenance costs.