Investment funds are a rapidly growing sector within the Cyprus financial services industry. There are two types of funds that can be set up in Cyprus: UCITS and non-UCITS. The non-UCITS funds are known as International Collective Investment Schemes (ICIS). In addition there is the possibility to distribute foreign UCITS and foreign non-UCITS in Cyprus.
An ICIS may be established with a limited or unlimited duration and are designated as an:
- Experienced Investor Fund
- Private Investment Fund
- Retail Fund
The ICIS fund offers plenty of advantages for the experienced investor. While UCITS must comply with specific investment and other restrictions, ICIS have no restrictions on the percentage of assets held in particular securities issued by a single issuer and have flexible requirements for the appointment of a custodian, fund administrator or management company.
There are no Cypriot taxes for investors in a Cypriot fund on the disposal or redemption of fund units/ shares and there are no withholding taxes on distributions made to non-Cypriot investors by a Cypriot fund.
A fund is exempt from tax on the disposal of its investments in fund units, shares, other equity securities and bonds. A fund is also exempt from tax on distributions received from investments in funds and shares held either directly or via special purpose vehicles. Interest income derived by a fund is subject to 12.5% income tax (net of deductible expenses and foreign tax credits available).
The EU’s Alternative Investment Fund Managers Directive (AIFMD) was transposed into Cyprus law on 5 July 2013 and investment management firms that fall within the Directive can avail themselves of the European passport and market across EU member states.
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