Why set up a Fund in Cyprus?

Published on June 11, 2021

The consolidation of the current Cyprus legislative framework in respect of investment funds has contributed in Cyprus being considered as a European and International Investment Funds Hub accommodating sophisticated fund structures as well as fund managers.

Being one of the first EU member states to transpose the Alternative Investment Fund Managers Directive into national legislation and together with the enactment and constant modernization of the Cyprus Alternative Investment Funds Law, Cyprus has transformed in an attractive and competitive environment for the evolvement of the national alternative investments industry.

In addition, the transposition of the Undertakings for Collective Investment in Transferable Securities (UCITS V) into national law offers prospective UCITS fund initiators the advantage of establishing an internationally reputable and regulated fund structure, with high transparency, enhanced risk management and liquidity provisions with lower set-up costs compared to other EU jurisdictions.

Cyprus is regarded to be in a considerable advantage compared to other countries for offering a complete package of investment fund services ranging from licensing to ongoing administration.

Pursuant to its membership within the EU since 1 May 2004, Cyprus is subject to and obliged to be in compliance with all the EU Directives and Regulations, resulting in Cyprus being a trusted destination for setting up credible investment funds and having the appropriate financial infrastructure for fund managers who wish to establish and/or register with CySEC in order to enjoy the full spectrum of their “passporting” rights.

Cyprus is also praised for its expert and knowledgeable service providers who offer their services at a comparatively lower cost without compromising the quality of their services. Furthermore, the smooth collaboration between the service providers and the competent authorities guarantees the swift and unwavering delivery of their services towards their clients.

By virtue of being one of the few former British colonies situated within the EU, Cyprus has inherited the English legal system and values. As a result, the Cyprus independent judicial system applies the principles of common law and draws guidance from English statutes and case law. 

Cyprus also offers one of the most attractive tax regimes in Europe. Foreign investors and Cyprus non-domiciled individuals enjoy no withholding tax on dividends. At the fund level, there is a uniform 12,5% corporation tax on profits, constituting one of the lowest corporation tax percentages in Europe. Fund management and administration services provided to investment funds are not subject to VAT, resulting to the value base of the investment fund not being burdened with a non-recoverable cost. Last but not least, Cyprus has access to an extensive network of double tax treaties allowing for tax efficient structuring of investments.

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