On 10th July 2018, the Parliament of the Republic of Cyprus passed significant amendments to the Law 131(I)/2014 on Alternative Investment Funds (AIFs).
The amendments are emphasizing the introduction of the Registered Alternative Funds (RAIFs).
The main characteristics of RAIFs are:
- Must be registered with the Cyprus Securities and Exchange Commission (CySec) but they will not be regulated
- Externally managed
- Addressed only to professional and well-informed investors
- Regulatory documents clearly state that it is under the specific AIFs Law
- Required to appoint a Cyprus based depositary
- No minimum capital requirements
- It can operate as open or closed-ended funds and act as an umbrella with multiple investment compartments, as long as this is mentioned in their regulatory documents.
- Can be set up as a mutual fund, investment company or a partnership
According to the Tax Law, each compartment of a RAIF will be treated as a separate taxpayer. This treatment also applies to AIFs and the Undertakings for the Collective Investment of Transferable Securities (UCITS).
Tax incentives for Overseas Fund Managers relocating in Cyprus
The Tax Law has introduced a special rate of 8% on the variable employment remuneration for Fund Managers for ten years, in the cases where their tax liabilities are not less than 10,000 euros.
There are additional tax benefits in place for overseas individuals who are relocating to Cyprus for employment. These are:
- 50% of the remuneration is tax-exempt for those foreign individuals who relocate to Cyprus, and their annual remuneration exceeds 100,000 euros. This exemption applies for ten years
- 20% of the annual remuneration with a maximum of 8,550 euro is tax-exempt for five years in the cases where the annual remuneration is less than 100,000 euros.
The non-taxable income threshold in Cyprus is 19,500 euros, and it is considered to be one of the highest in the European Union.
Cyprus is considered to have one of the most advantageous tax systems in the European Union, especially for those overseas individuals who invest in Cyprus and those individuals who relocate to Cyprus for Employment.
The Cyprus Tax Laws and Regulations are simple and straight forward in nature, making Cyprus an attractive tax jurisdiction.