New Alternative Investment Legislation
On 10 July 2018, the Cyprus Parliament approved the new Alternative Investment Fund legislation, replacing the existing law and enabling for the first time the establishment of Registered Alternative Investments Funds (RAIFs).
The provisions of the legistlation will become available once the law comes into effect and will be published by the official Government Gazette.
Based on the information currently available, the following criteria and characteristics in relation to RAIFs are expected:
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RAIFs will not be regulated by CySEC and the supervision will be at the level of the Registered Fund Manager
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There will be a Registrar of RAIFs where all RAIFs will be registered iby CySEC
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Requirement to appoint a local depository
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The Fund can be either open or closed ended
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There is the option for an umbrella structure
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RAIFs are addressed to professional and/or well-informed investors
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Can be structured as a common fund, investment company (variable or fixed capital), or limited partnership
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Within one month of receipt of all required documents in accordance with the Directive, the CySEC shall inform the applicant by letter whether the application has been accepted
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No minimum capital requirement
In addition to the above new points concerning RAIFs, the below provisions concerning investment funds have been introduced:
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No permanent establishment will be deemed to arise in Cyprus in the case of investment into Cyprus tax-transparent funds by non-resident investors and/or in the case of management from Cyprus of non-Cyprus investment funds. Income from such investments will be taxed in the country of residence of the investor.
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Persons who are both Cyprus tax resident and Cyprus domiciled will be subject to special defence contribution at a rate of 17% (instead of 3%) on profits received from Cyprus investment funds.
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A new special mode of taxation will be introduced at the rate of 8% and a minimum annual tax payable of €10.000 (based on a specific criteria) for certain employees and executives of investment fund management companies. This new mode of taxation will be available for a total period of ten years.