Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

FORTIFYING THE CYPRIOT FUNDS’ LEGAL FRAMEWORK

The Cypriot funds industry has been developing in recent years and is now making significant strides ahead to position itself as a reputable funds’ jurisdiction. The transposition of the Alternative Investment Funds Manager Directive (AIFMD) into national law on the 22nd July 2013 has strengthened the Cyprus funds industry and made the local legislation compliant with the EU regulatory framework.

Charles Savva
Charles Savva

The AIFMD affects both Alternative Investment Fund Managers (AIFMs) in the EU as well as those who market or offer investment management services to EU Alternative Investment Funds (AIFs). The AIFMD Law outlines the rules for supervision, the operation and transparency of AIFMs in Cyprus. In order to obtain authorization, the AIFM will need to file information on itself and the AIF, for which it intends to manage, to the local regulator the Cyprus Securities and Exchange Commission. The information required to be submitted includes details of the shareholders, corporate structure, remuneration policies, valuation and pricing methodology, depositaries as well as investment strategy. Once authorization is granted it will be valid across all EU member states and the European Securities and Markets Authority (ESMA) will keep a central register listing each authorized AIFMs’ details.

By having regulated AIFMs, AIFs will be freely marketed across the EU through passporting. The AIFMD Law regulates the marketing of AIFs and allows a passport for the AIF to be distributed to professional investors (as defined by MiFID) in all other EU states. The EU passporting does not include the marketing and distribution of the AIF to retail investors, as this is subject to the approval of the regulator in each EU state.

Moreover, by having the EU directive transposed into national law, Cyprus offers assurances to investors that the AIF is being managed in line with an EU regulatory framework thus attracting a potentially larger pool of investors.

The Cyprus International Collective Investment Scheme (ICIS) will be classified as a non UCITS (Undertakings for Collective Investment in Transferable Securities) fund and is under the scope of the AIFMD Law. Due to the attractive fiscal benefits offered in Cyprus, including low corporate tax, withholding tax exemptions and an extensive network of double tax treaties, Cyprus AIFs offer foreign investors a tax efficient vehicle through which they can structure their investments. Cyprus AIFs are commonly used to structure investments in private equity as any earning realized from the disposal of such shares, would not be subject to tax in Cyprus.

Moreover, proceeds from the redemption of units in a Cyprus AIF are also tax exempt at the investor level. Cyprus AIFs that own shares in a foreign subsidiary can receive dividends, in most cases, tax exempt in Cyprus.

The enactment and implementation of the Law is a welcome development as it strengthens the legal framework for funds, impacts the way administrators, depositaries, and fund managers operate and provides detailed guidelines on how the supervision of these entities should be governed.

As a result of the recently enacted Law the following benefits have been obtained:

  • An EU-wide “passport” under which AIFMs can provide cross border management and marketing services to AIFs;
  • Detailed regime regarding depositary functions of safekeeping, cash monitoring and oversight;
  • Operating conditions for AIFMs including internal control and compliance, risk management, liquidity management, transparency, delegation arrangements, conflicts of interest, and remuneration policies;
  • Rules regarding third-country undertakings.

For further details regarding the latest developments in the Cypriot funds industry, for identification of tax implications and advise on the licensing and regulatory requirements of Cyprus AIFs please contact Charles Savva at +357 22 516 671, or by email at [email protected]