The international business environment has been changing rapidly over the past few years since there is a global movement towards transparency which leads to the introduction of the new stricter legislations and Anti Money Laundering procedures. The banking sector has become very strict, sceptical and reluctant in accepting foreign investors and raised barriers to many businesses that operate internationally. A significant factor considered by both banks and the tax authorities is the so-called substance. Many companies are struggling in establishing a business rational for setting up substance abroad and also the management and controlled is often questioned by the authorities and the banks. At the same time, in light to the economic crisis there is a need to look for alternative financing methods for the businesses.
Therefore, a good solution for the entrepreneurs is to invest in funds since they meet the above-mentioned criteria. The reason is because fund industry is highly regulated, a fact the provides transparency to the businesses and the banks are more willing to facilitate the operations of such organisations.
Cyprus has introduced a complete and modernised fund legislation which combined with the tax benefits has led to a significant growth during the past few years in fund industry, establishing the island as one of the major fund jurisdictions in the European Union. Cypriot professionals have developed their skills over the fund sector and are able to provide first class services to those interested in entering the fund industry. Along with the above factors, Cyprus can provide a number of significant benefits to the investors, making the country an attractive fund destination.
Benefits offered form the establishment of a Cyprus Investment Fund:
- Cyprus was one of the first EU member states to transpose the AIFM Directive into national legislation.
- As a result Cyprus funds can provide an EU passport offering fund managers cross-border fund distribution since fund managers are fully compliant with the EU legislation.
- Redomiciliation laws are in place
- Rigorous anti‐money laundering laws and regulations which gives Cyprus the status of a compliant jurisdiction.
- Country’s population is one of the most highly educated within the EU and
- has a strong network of financial and professional service providers who have skilled, educated and multilingual teams specialized in servicing the fund industry, lawyers, accountants and auditors.
- Any kind of asset can be included in the investment strategy of the AIF
- Umbrella structures are available
- Various types of funds are available (e.g. AIF, AIFLNP, RAIF), with different characteristics to better fit to the needs and wants of any investor.
Taxation benefit for the fund itself:
1. Capital Gains tax from the sale of corporate titles and other financial instruments
2. Capital Gains tax from the sale of immovable property situated outside Cyprus
3. Dividends received
Taxation benefit for the Foreign Investors:
Taxation benefit for the Fund Manager:
To conclude with, the establishment of a fund in Cyprus can offer to our non-resident clients’ transparency and real substance which cannot be challenged by the tax authorities, since the management and control will effectively be made through the Cypriot fund managers. Cyprus has an attractive tax regime and lower set up and maintenance costs in comparison to the other European fund hubs. Cyprus has also a strategic location as it is located in the middle of three continents, being the bridge of African countries, Middle East and Gulf countries with Europe. Consequently, the island has been established as a headquarter centre for those regions. These factors give to Cyprus a competitive advantage against the already established EU fund jurisdictions and make the country an attractive destination for investors.
Globalserve Consultants Ltd is a licensed provider and accounting firm in Cyprus specializing in company registration in Cyprus and other jurisdictions, banking and accounting services. Visit our website to find more information in our services and register to receive our newsletters and tax alerts www.gstaxconsultants.com