WHY CYPRUS IS A GREAT PLACE TO SET UP AN INVESTMENT FUND
Cyprus has big ambitions and has set its sights on becoming a fund and asset management center of excellence with upgraded legislation and increasing inflows of foreign investments. In the last few years, Cyprus has grown to be one of the fastest emerging fund markets in Europe. It has become one of the world’s top destinations for alternative investment funds (AIF). The country has seen considerable growth in both asset value and the number of local funds. Starting out in 2013 with €1.2 million in asset under management (AUM) currently having €9 billion, AUM is expected to rise to an incredible €20 billion in the next five years.
As Cyprus has brought its legislation fully in line with EU law, including the Alternative Investment Funds Manager Directive, it should continue to draw in foreign capital from both the EU and beyond. Analysts expect that the record recent growth of the local fund industry will continue to grow. The passing of the Alternative Investment Fund Law of 2014 and the transposition of the UCITS IV Directive into domestic Law in 2012 have harmonized the local regulatory framework in line with the EU fund regulations.
Tax & Costs
According to CySEC, the impressive growth in AUM is due to the country’s investor-friendly tax regime and low company set-up costs.
Cyprus 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 in the value base of the investment fund not being burdened with a non-recoverable cost. 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.
Last but not least, Cyprus has access to an extensive network of double tax treaties allowing for tax-efficient structuring of investments. Cyprus has signed 65 bilateral double-tax treaties which pave the way for direct investments in the EU as well as Africa, Asia, and the Middle East.