Investment Funds
Cyprus Tax Facts
Cypriot Funds are established under a harmonized EU legal framework, and application procedures are undertaken with the Cyprus Securities and Exchange Commission (CySec); the authority in charge of supervision and regulation of investment funds & Fund Managers in Cyprus. In brief, Cypriot laws on investment funds provide for the following:
Cypriot Alternative Investment Funds (AIFs)
Cypriot registered AIFs can be sold on a private placement basis or marketed to professional investors across the EU under the Alternative Investment Fund Managers Directive (AIFMD) passport.
AIFs can be structured in one of the following forms:
- Fixed Capital Investment Company
- Variable Capital Investment Company
- Investment Limited Partnership
- Common Fund (AIF with unlimited number of persons only)
Registered AIFs (‘RAIFs’)
A RAIF is a special type of AIF that is not subject to authorization from CySec but is regulated through its external licensed manager (AIFM).
A RAIF can be set up as:
- A mutual fund
- An investment Company
- A partnership
Undertakings For Collective Investment In Transferable Securities (UCITS)
UCITS Funds are collective investment portfolios that invest in transferable securities and/or other liquid financial instruments, which operate on the principle of risk – spreading, and provide low investment risk and high level of investor protection.
A UCITS fund may be set up in one of the following legal forms:
- Common fund (CF)
- Variable capital investment company (VCIC).
Fund Taxation
- No capital gains on the disposal of securities
- Notional Interest Deduction (NID) on new equity reducing the effective interest tax
- No subscription tax on net assets of funds
- No tax on dividends received
- No withholding taxes on dividend payments from Cyprus to non-residents
- No thin capitalization rules
- No VAT on fund management services to AIF
- Low corporate tax rate
- Low operating costs
- Each AIF compartment taxed as a separate taxpayer
- Interest received is taxed at the corporate tax rate
- Double Tax treaty network
- Tax favourable re-domiciliation & employment scheme
Foreign Investor Taxation
- No taxation on redemption of units
- No deemed dividend distribution tax
- No withholding taxes on dividend payments from Cyprus to non-residents
Resident Non-Domiciled Investor Taxation
- Flat rate tax for individuals with performance based variable remuneration, not applicable to all employees.
- No withholding taxes on dividends via non-domicile status
- No taxation on redemption of units
- No withholding tax if the investor is a company
Resident Domiciled Investor Taxation
- Flat rate tax for individuals with performance based variable remuneration, not applicable to all employees.
- Withholding taxes on dividends for investors with resident & domicile status
- No taxation on redemption of units
- No withholding tax if the investor is a company