Cyprus: Investing Into The Balkans Through A Cyprus Alternative Investment Fund

As a collection of emerging markets with strong growth potential, the Balkan countries have firmly positioned themselves on the map of attractive investment locations. Steadily growing numbers of foreign investors have expanded into Albania, Bosnia and Herzegovina, Croatia, Kosovo, North Macedonia, Montenegro and Serbia, drawn primarily by the region's favorable location, its affordable workforce and creative tax regimes.

Real Estate in these countries attracts significant investment as well mainly due to population growth and increasе of purchasing power, which creates substantial opportunities in real estate.

With tax systems that offer a plethora of advantages to foreign investors (corporate income tax rates rate from 9% to 20%); certain industry sectors provide additional incentives to investors. Tourism and Energy are of particular interest in Albania and Montenegro, natural resources exploration and exploitation in Serbia, agriculture in Bosnia, IT in Croatia and Kosovo, and clothing and automotive components in North Macedonia. Most of the Balkan countries also have a network of Free Zones, where further tax incentives, exemptions and deferrals apply.

One of the approaches to investments into Balkans from Cyprus is the investment via Cyprus Alternative Investment Funds ("AIF"s). AIFs are governed by more flexible regulations as compared to other organizational forms of entities and use a wider range of strategies as compared to traditional funds, making them an attractive investment instrument. AIFs are known and used all over the world and permit the private units' placement among participants, with the consideration of securities' legislation of respective jurisdictions.

Cyprus AIFs are domestic funds recognized abroad, whose units of participation can be disposed of by means of private placement to investors and used for investing into other countries, including countries in the Balkans, subject to the compliance with securities` legislation of respective jurisdictions. Investment can be performed in the form of equity investments, non-listed securities, shares in the charter capital, etc.

AIFs are regulated and licensed by the Cyprus Securities and Exchange Commission ("CYSEC"). AIFs can be set up as umbrella funds, operating with various investment types, policies, etc, and with the creation of independent sub-funds.

According to AIF Law, there are no specific requirements for the unitholders and investors of AIF, other than the requirement of the unitholders and investors undergoing an extensive "know your customer" procedure and if the latter is a legal entity, then all relevant information and documents should be provided until a natural person – ultimate beneficial owner is identified, as well as sufficient information as to the origin of the assets.

Continuous alignment of legislation to EU norms is being made, with more work still ahead. And while the region is facing certain challenges – particularly in terms of political instability, bilateral cooperation and infrastructure networks – the common vision of EU membership keeps Balkan countries firmly on the path of perpetual growth.

Eurofast, as a recognized leading professional services provider in the region, with excellent reputation and significant experience in the corporate and financial services market, would be happy to assist clients wishing to establish AIF for investing into Balkans on all aspects relating to the establishment and maintenance of AIF, including the representation to CYSEC throughout the procedure for obtaining the license. We are able to provide all the necessary advice and assistance on all stages of AIF establishment in order to mitigate any risks and challenges which you may face with this regard. Thanks to our coverage in every country and big city in the Balkans we are also able to assist in identifying the target investment, perform the necessary due diligence on the acquisition as well register the funds subsidiaries in the target country.

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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