Cyprus: International Collective Investment Schemes – An Outline Of The Set Up And Procedure

Last Updated: 22 September 2011
Article by Yiannos Georgiades

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International Collective Investments Schemes in Cyprus are governed by the International Collective Investment Schemes Law (Law 47(I) of 1999 as subsequently amended, the "Law").

An "international collective investment scheme" ("ICIS") is defined as and may take the form of:

  • An international company with fixed capital ("ICFC");
  • An international company with variable capital ("ICVC");
  • An international unit trusts scheme ("UT"); and
  • An international limited partnership ("ILP").

The purpose of an ICIS is the collective investment in property belonging to the members of the scheme i.e. the unit holders, whose units may be redeemed or repurchased by using assets of the scheme.

A unit holder of an ICIS can be any person (individual or company) with non – resident status.

The Law recognises three categories of ICIS, namely schemes:

  • Open to the public;
  • Open to experienced investors; and
  • Which, are private ("PICIS").

The first two types of ICIS are regulated by the Securities and Exchange Commission of Cyprus and PICIS are regulated by the Central Bank of Cyprus. This publication summarises the position regarding PICIS only.

A PICIS must not have more than 100 members, must restrict the transfer of units (though transfers of units between unit holders are allowed and transfers of units to non unit holders may be allowed) and may be created for a limited or unlimited time (it may be would up on a certain date or upon the happening of an event). A PICIS is not required to issue a prospectus, no investment restrictions are imposed and is not required to appoint a manager. A custodian (usually and preferably a local bank) needs to be appointed.

ICFC (International Company with Fixed Capital).

An ICIS in the form of an ICFC may be described as a collective investment scheme in the form of a company with fixed capital whose main object is to hold securities and other property by way of investment.

In order to operate, an ICFC must obtain the approval of the Central Bank, which, must be satisfied that:

  • The directors of the ICFC are competent and honest;
  • The manager (if one is to be appointed), who will be responsible for the investments is approved. A manager may not be appointed if the Central Bank is satisfied that the directors are competent to carry out the duties and function of a manager;
  • The trustee (if one is to be appointed), who will be responsible for holding the investments, is approved. A trustee may not be appointed if the Central Bank is satisfied that the members will not be prejudiced by the non appointment of a trustee;
  • The manager (if one is to be appointed) and the trustee (if one is appointed) are independent of each other;
  • The memorandum and articles of association are in the approved form;
  • The ICFC has filed all required documents and has paid the required fee;
  • The name of the ICFC is not undesirable.

The Central Bank in granting approval may impose various terms and conditions and amend the same from time to time.

The appointment and removal of the directors of an ICFC is subject to the approval of the Central Bank.

ICVC (International Company with Variable Capital).

This type of company is the creation of the Law and was not previously known or used in Cyprus.

An ICVC may be described as a collective investment scheme in the form of a company with variable capital whose main object is to hold securities and other property by way of investment and which, has the power to redeem or repurchase its own shares out of its own funds or ensures that its shares may be sold at a price related to the net asset value attributable to them.

In order to operate, an ICVC must obtain the approval of the Central Bank. The same requirements as in the case of an ICFC must be satisfied.

The share capital of an ICVC is not fixed. It is variable and may be varied from time to time. The Law provides that the memorandum and articles of association may provide that:

  • The share capital is equal to the net asset value of the issued shares from time to time;
  • The share capital is divided into a certain number of shares with no nominal value; and
  • The value of the issued shares of the company is equal to the net asset value of the company from time to time.

An ICVC may redeem and repurchase its own shares (thus providing an exit route from the scheme for its members) by using its assets (there is no requirement for redemption reserves) and in such a case the shares redeemed or repurchased are cancelled and the company's share capital and reserves are reduced by the amount paid by the company.

The appointment and removal of the directors of an ICVC is subject to the approval of the Central Bank.

UT (Unit Trusts)

A UT may be described as a collective investment scheme in the form of trust whereby various persons i.e. the unit holders, as beneficiaries under a trust, participate in profits or income arising from the acquisition, holding, management or disposal of securities and other property. Under a UT, a unit holder has an interest in an undivided proportion of the securities, cash and other property comprised in the trust fund equal to that which, the number of units held by him bears to the total number of units in existence.

In order to operate, a UT must obtain the approval of the Central Bank. The same requirements as in the case of an ICFC must be satisfied. An additional requirement is that the UT must be a Cyprus International Trust created under Cyprus Law i.e. a trust with non resident settlor(s) i.e. creator(s), non resident unit holders with at least one trustee resident in Cyprus. The trust fund, which, is defined in the Law as (i) proceeds of sale of units and (ii) income from trust property not distributed to unit holders, may comprised in any form of property except immovable property in Cyprus.

The appointment and removal of the trustees of a UT is subject to the approval of the Central Bank.

ILP (International Limited Partnerships).

An ILP may be described as a collective investment scheme in the form of a limited partnership whose main object is to hold securities and other property by way of investment, having at least one general partner who is responsible for managing the ILP with unlimited liability and the limited partners being in effect the investors whose liability is limited.

In order to operate an ILP must obtain the approval of the Central Bank. The same requirements as in the case of an ICFC must be satisfied.

The main features of an ILP may be summarised as follows:

  • The general partner(s) is responsible for managing the ILP.
  • If a limited partner takes part in the management of the ILP he shall be liable for all debts and obligations thereof while he was involved in the management as though he were a general partner.
  • A limited partner may do any of the following without being a general partner:
    1. He can be an employee or agent of the ILP or a shareholder of the general partner(s);
    2. He can consult and advise the general partner(s);
    3. He can inspect the ILP accounts and books;
    4. He may guarantee obligations of the ILP;
    5. He can vote as regards the winding up of the ILP, the sale, purchase, exchange, pledge, charge or transfer of an ILP asset, the creation of a debt, the change of ILP policy, the removal of the general partner(s) or the trustee and the approval of a transaction involving the general partner.

Subject to the consent of the general partner, a limited partner may assign his share in an ILP and a new limited partner may be introduced.

A limited partner shall not during the life of the ILP draw out or receive back any of its contribution unless the general partner certifies that the ILP is solvent.

An ILP shall be dissolved as a result of the death, bankruptcy, winding up or insolvency of the only or the last general partner or the revocation of the approval granted by the Central Bank unless the majority of 75% of the limited partners appoint another general partner (who must be approved by the Central Bank). An ILP may be dissolved by a notice of dissolution served by the general partner.

Subject to any express or implied provision in the partnership deed, any dispute or difference regarding the business of an ILP is resolved by the general partner.


The procedure described bellow must be followed to obtain the required Central Bank approval and create an ICIS (the procedure is the same more or less irrespective of the form of the ICIS).

An application is filed to the Central Bank in the required form together with the following information and documents:

  • The names of the first shareholders (if an ICFC or ICVC), its directors, and other officers and its professional advisers together with references from at least three referees for each director, officer and shareholder and the proposed company's memorandum and articles of association.
  • The names of the settlor(s), the trustee and the first unit holders (if any) (if a UT) and its professional advisers together with references from at least three referees for the trustee and the proposed trust deed.
  • The names of the general partner(s) and the first limited partners (if an ILP) and its professional advisers together with references from at least three referees for the general partner and the proposed partnership deed.

In addition to the above, the constituent documents of any corporate trustee and general partner shall be also filed to the Central Bank.

If any shareholder of an ICFC or an ICVC or a general partner or a trustee is a corporate body, references are also required of its directors and shareholders.

For each individual a Curriculum Vitae must be required stating the last three employers of such individual (the Central Bank usually contacts them).

The Central Bank reviews the application and the submitted documentation in order to ensure their compliance with the Law and the Regulations and that they contain the required information. During the review process, the Central Bank may make comments and require amendments to the constituent documents of the ICIS.

Once the review process is completed the Central Bank, if satisfied, will grant a certificate of approval of the ICIS. The Bank maintains a Register, which is open to the public for inspection.

The review process may take up to 6 – 8 weeks but it may be completed in less time if a well-known bank or similar institution is involved or the applicants are already regulated by a foreign competent authority or have previous experience. Further information about the requirements of the Central Bank is available at the Bank's website at .

In the case of an ICFC, ICVC and an ILP the creation and registration process also involves the registration with the Registrar of Companies. Depending on the circumstances and how quickly the client responds to any inquiries made by the Central Bank for clarifications and amendments, the whole process may take up to three months.

Other useful information


The gains from the sale of investments by an ICIS are not taxable.

Under Cyprus applicable tax legislation, tax on dividends (called special contribution for the defence "SCD") is 15% and tax on interest received is 10% (less any tax credits allowed by applicable double tax treaties). Under certain conditions, dividends received are not taxable. Namely dividends are not subject to SCD if received from a non-resident company in which a Cyprus company holds at least 1% of the share capital. The exemption will not apply if the paying company derives more than 50% of its income from investments and foreign tax on the income of the paying company is substantially lower than Cyprus taxes. Accordingly, the liability of an ICFC and ICVF to tax will depend on the above but the applicable legal and tax framework in Cyprus provides excellent tax planning opportunities to avoid the payment of tax all together.

In the case of a UT (being a Cyprus International Trust) its income is totally exempt from tax by virtue of the Cyprus International Trusts Law.

In the case of an ILP, under applicable Cyprus Law, its income is that of its partners and accordingly the tax treatment thereof, will depend on the tax resident status of the partners.

The unit holders (being non – residents) are not liable to any taxes in Cyprus for the sale of units or to any withholding taxes on any distribution of income out of the ICIS.

An ICIS may establish a company (or other entity) to be used as an investment vehicle. In fact this may be advisable if there is a need to take advantage of the Cyprus Double Tax Treaties network or to reduce any potential commercial or other risks by not having the ICIS itself directly holding the investment. If a Cyprus tax resident company is used, its net profits are taxed at 10%. The treatment of dividend income is described above.


Costs (including our fees, all registration and other Government duties and fees) to set up an ICIS and to apply for and obtain the required Central Bank approval including, drafting the required documents memorandum and articles of association, trust deed or partnership deed, preparing, completing and filing the required application form to the Central Bank, attending meetings and other communications with the Central Bank during the review process, registration and incorporation of the ICFC or ICVC, registration of an ILP, will range depending on the initial value of the ICIS, the complexity of the ICIS, the need for any special drafting requirements and other relevant factors. Once we have a complete inquiry by a client and sufficient information in respect of the above, we can give an indication of the total costs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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