Cyprus funds sector boost as EU expands list of non-cooperative jurisdictions
Cyprus has established itself as a significant player in the EU funds industry in recent years with substantial growth in terms of both asset value and the number of funds and fund managers that are based on the island.
This growth looks set to be boosted by the announcement by the Economic and Financial Affairs Council (ECOFIN) of EU finance minsters, on 18 February 2020, that both the Cayman Islands and Panama had been added to its ‘black list’ of non-cooperative jurisdictions for tax purposes. Both these prominent fund jurisdictions had failed to implement tax reforms to which they had committed by the agreed deadline of end 2019.
By way of contrast, regulatory changes in the Cyprus funds industry have resulted in the full alignment of local legislation with the relevant EU Directives, including the Alternative Investment Funds Manager Directive.
Assets under management (AuM) in Cyprus have doubled in two years, according to data from the Cyprus Securities and Exchange Commission (CySEC). The increase from €3.9 billion to €7.6 billion by the end of the third quarter 2019 was attributed by CySEC to low set-up costs and the country’s ‘favourable’ tax regime.
The strategic position of Cyprus and the plethora of signed double tax treaties that allows for direct investments in the EU and in developing countries throughout the Middle East make Cyprus an attractive jurisdiction for setting up alternative investment funds. More than half of the country’s domiciled AuM relates to private equity and venture capital investments.
The entire fund ecosystem, from custodians, fund administrators and other professionals has been established to accommodate the growth in the fund industry with more anticipated to follow. There are now 203 management companies and undertakings of collective investments in Cyprus, up from just 13 companies five years ago.
Sovereign Trust (Cyprus) can assist with the formation of funds in Cyprus. Services include incorporation and licensing of the fund, drafting of the fund prospectus and of the necessary agreements between the fund manager and investment manager and others such as custodians, investment advisors, bankers, registrars and company secretaries.
