Cyprus: Cyprus Alternative Investment Funds - Your Gateway To Europe And Beyond

Last Updated: 8 June 2016
Article by Charles Savva

With the July 2014 enactment of the Alternative Investment Funds Law (the "AIF Law" or "Law"), Cyprus modernised and significantly enhanced the offering of alternative investment funds, or "non-UCITS", which can be registered and domiciled in Cyprus.

The AIF Law replaced the previous International Collective Investment Scheme Law of 1999, and has resulted in the regulation of all investment products, asset managers and investment firms being under the auspices of the Cyprus Securities and Exchange Commission ("CySec").

With the enactment of the AIF Law, Cyprus now offers the full spectrum of legislative framework to all fund products, both UCITS and non-UCITS, and provides fund managers the opportunity to structure as a licensed Alternative Investment Fund Manager, in accordance with the relevant EU directive, or a MiFID compliant Investment Firm, both offering EU passporting.

The Law allows for the creation of AIFs with Unlimited Number of Persons ("AIF-UNP"), or AIFs with Limited Number of Persons ("AIF-LNP"), the latter being the most flexible and "light-touch" regulated form of investment fund.

An AIF can take various legal forms from Fixed or Variable Capital, Limited Partnership or Common Fund (available only as an AIF-UNP).

The main provisions of the AIF Law can be summarised as follows:

  1. Ability to create AIFs with unlimited investment compartments (i.e. umbrella funds), each with a separate investment strategy and asset pools.
  2. Can list the units of AIFs on various stock exchanges.
  3. Various options available in relation to the appointment of an Investment Manager and Depositary, providing maximum flexibility.
  4. Investor units are transferable.
  5. The AIF-LNP is limited to a maximum of 75 investors.

During the last three years, the funds industry in Cyprus has experienced significant growth, resulting in the Island establishing itself as one of the major EU fund jurisdictions, with many reasons to domicile your AIF in Cyprus.

Its strategic geographic position, stable political system, attractive tax system, modernised AIF Law, combined with EU and Eurozone memberships, have served to attract global funds and fund managers alike.

The recent regulatory changes in the Cyprus funds industry have resulted in the full alignment of local legislation with the relevant EU Directives, including the Alternative Investment Funds Manager Directive.

Overall, Cyprus is the most flexible and cost efficient fund jurisdiction in the EU, a member of the EuropeanSecurities and Markets Authority (ESMA), and additionally boasts a comprehensive funds and related services workforce comprising of some 2,500 qualified lawyers and 4,000 qualified accountants, establishing Cyprus as a prominent player within the EU funds industry.

The Cyprus Law provides two types of AIFs, the AIF with unlimited number of persons (AIF-UNP) and AIF with Limited number of persons (AIF-LNP).

The main features of an AIF-UNP are summarised as follows:

  1. Can be marketed to any type of investor, including retail investors.
  2. Can be created as a limited liability company, a limited partnership or a common fund.
  3. Where an AIF-UNP is formed as a limited liability company, it can be self-managed by its Board of Directors, and in all other cases the appointment of an external investment manager is required.
  4. The investment manager must be:
  • A management company authorised under the AIFM Managers Law of 2013, or the equivalent from another EU member state (in accordance with the AIFM Directive).
  • A management company authorised under the Open Ended Undertakings in Collective Investments Law, or the equivalent from another EU Member state (in accordance with the UCITS IV Directive).
  • A company authorised to carry out portfolio management services under the Investment Services and Regulated Markets Law (i.e. a Cyprus Investment Firm).
  1. Must always appoint a depositary/custodian who can be a credit institution, a MiFiD investment firm or any other company subject to prudential supervision who may be based in Cyprus, the EU or in any third country which CySec has a signed cooperation agreement with (certain restrictions apply if the AIF-UNP is managed by an AIFM).
  2. Must be established with a minimum initial capital of €125,000 (or €300,000 in the case of a self-managed AIF-UNP).
  3. The units of the AIF-UNP can be listed on a recognized stock exchange.
  4. Can be established with unlimited investment compartments (sub-funds / umbrella fund), each with a separate investment strategy and asset pools.
  5. Is subject to investment restrictions / diversification rules which vary depending on the nature of the AIF's investments (i.e. liquid vs illiquid assets) and on the AIF's targeted investors (i.e. retail investors vs experienced investors).

The main features of an AIF-LNP, considered a "light-touch" investment fund, are summarised as follows:

  1. Must be marketed only to professional or well-informed investors.
    • A professional investor, as defined within the MiFiD Directive, is an investor who possesses the experience, knowledge and expertise to make his or her own investment decisions and properly assess the risks that he or she incurs.
    • A well-informed investor, as defined within the AIF Law, is an investor who does not qualify as a professional investor and:
      • Invests a minimum of €125,000 in the AIF, or
      • Is successfully assessed as a well-informed investor by a bank, an investment firm or by a UCITS management company in Cyprus.
  2. The maximum number of investors permitted, at any time, is capped at 75.
  3. Can be created as a limited liability company or a limited partnership.
  4. Where an AIF-LNP is formed as a limited liability company, it can be self-managed by its Board of Directors. If the AIF-LNP is formed as a limited partnership, it must appoint an external investment manager.
  1. The investment manager must be:
    • A management company authorised under the Open Ended Undertakings in Collective Investments Law, or the equivalent from another EU Member state (in accordance with the UCITS IV Directive).
    • A company authorised to carry out portfolio management services under the Investment Services and Regulated Markets Law (i.e. a Cyprus Investment Firm).
    • A company created with the sole purpose of managing the specific AIF-LNP.
  2. An AIF-LNP is not required to appoint a depositary/custodian if:
    • Its assets are less than €5,000,000, or
    • If it sets the maximum number of investors to 5, or
    • Its assets are not subject to custody.
  3. If the AIF-LNP  appoints a depositary/custodian, this can be a credit institution, a MiFiD investment firm or any other company subject to prudential supervision based in Cyprus, the EU or in any third country with which CySec has a signed cooperation agreement with (certain restrictions apply if the AIF-UNP is managed by an AIFM).
  4. There are no minimum initial capital requirements.
  5. There are no investment restrictions.
  6. There are no investment diversification rules.
  7. The units of the AIF-UNP can be listed on a recognized stock exchange.
  8. Can be established with unlimited investment compartments, each with a separate investment strategy and asset pools, however the number of investors must be limited to 75 (over the entire AIF).

The key taxation benefits which an AIF and its stakeholders can enjoy are the following:

  1. Exemption from tax on profits from the disposal of securities (it should be noted the Cyprus Tax Authorities have provided a wide definition of what constitutes eligible securities/titles).
  2. Exemption from tax on dividend income (subject to certain conditions).
  3. No withholding taxes on repatriation of dividends, interest and royalties to non residents.
  4. 12.5% corporate tax rate, being among the lowest in the EU.
  5. An extensive and continuously growing network of double tax treaties.
  6. No stamp duty on the issue of units in AIFs.

Savva & Associates: Cyprus' premier funds services provider

Savva & Associates is a premier funds services provider  in Cyprus with a team of qualified accountants, lawyers and fund experts assisting international clients worldwide.

We are a Cyprus Securities and Exchange Commission licensed fiduciary and corporate services providers. We are one of the few providers experienced in the licensing and administration of AIF's, and the most cost efficient in delivering high level alternative investment fund services in Cyprus.

Our dedicated Investment Funds Division has extensive knowledge of financial services, coupled with local legal and tax expertise, ensuring efficiency in the establishment, licencing and ongoing management of AIFs.

To discuss your specific AIF needs and to find out more about Cyprus fund formation and the complete AIF submission process contact Mr Charles Savva, (Managing Director and Head of Tax) at or Mr Panayiotis Vassiliades, (Chartered Accountant and Director of S&V Audit Services Ltd) at

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Charles Savva
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.