Alternative Investment Funds In Cyprus (AIF And RAIF)

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What is a Cyprus RAIF and how is it different from an AIF?

A Registered Alternative Investment Fund (RAIF) is a Cyprus fund that CySEC does not license or authorise. It is registered within one month and must always be managed by an authorised external manager, which makes it the fastest Cyprus fund to launch. It has no minimum capital but must raise €500,000 within 12 months, and it is open only to professional and well-informed investors, not retail. A full AIF, by contrast, is authorised by CySEC and can be marketed to retail investors.

Alternative Investment Funds ("AIF") are entities that collect funds from investors for their investment and are regulated by law. Typically, the entity is a company of fixed or variable capital with specified purposes, but may also be a limited partnership. Cyprus offers one of the most competitive alternative investment funds frameworks as it offers low registration and administration costs as well as an attractive taxation and legal regime.

Types of AIFs

The AIF Law of 2018 provides for three types of AIFs: AIFs with Limited Number of Persons (AIFLNP), AIFs with Unlimited Number of Persons (AIFUNP), and Registered AIFs (RAIFs). They vary according to the following:

The Difference Between Professional, Well-Informed and Retail Investors

Professional investors, as defined within the Second Appendix of the Law for the Provision of Investment Services, the Exercise of Investment Activities and the Operation of Regulated Markets Law, are expected to possess the experience, knowledge, and expertise to make their own independent investment decisions and to assess the incurring risks.

Well-informed investors, as defined in the AIF Law, do not qualify as professional investors but will confirm in writing they have sufficient knowledge and experience in business and finance and invest a minimum of €125,000 in the AIF or are successfully assessed as well-informed investors by a bank, an investment firm, an AIFM, or a UCITS management company in Cyprus.

Retail investors are any other investors who do not fall under the two categories above.

Why Set Up an AIF in Cyprus

Cyprus has established itself as the distribution centre to Eurasia, India, China, and further emerging markets due to its position at the crossroads of Europe, Asia, and Africa.

Within a fully-fledged anti-money laundering system in compliance with the EU Directives, Cyprus does not impose any restriction on the type of investments of an AIF and imposes only light reporting standards on the Regulator.

The Cypriot legal framework accelerates the time of trading of an AIF, as in the case of RAIFs which bear no licensing requirement before they emerge in business.

Tax Benefits of an AIF in Cyprus

An AIF in Cyprus is part of an EU and OECD compliant tax system. When formed as a limited liability company and managed wholly in Cyprus, an AIF is treated like any other Cypriot entity and enjoys one of the most attractive taxation packages in Europe offering:

• 15% corporate tax on net profits from 1 January 2026 (increased from 12.5% under the 2026 tax reform), which the notional interest deduction on new equity can reduce further, to an effective rate as low as about 3%;
• No subscription tax on the net assets of the fund;
• No tax on investment fund management and administration;
• No tax on income repatriation;
• No withholding tax on payments made to non-Cyprus residents;
• Exemption from tax on profit from trading in securities;
• Exemption from tax on income from dividend distribution;
• Exemption from tax on capital gains from the sale of immovable property outside Cyprus;
• No stamp duty (the Stamp Duty Law was abolished from 1 January 2026);
• Double Tax Treaty network with more than 65 countries worldwide.

Formation Process of an AIF in Cyprus

The setup and maintenance of an AIF in Cyprus carry low costs and involve a simple and time-saving application process.

An AIF in Cyprus falls under the authorisation of the Cyprus Securities and Exchange Commission (CySEC). As part of its authorisation, it will need to file information on its business plan, organisational structure, and internal operations as well as the persons conducting its business and its shareholders and submit these together with regulatory documents to CySEC. The application to CySEC requires the payment of a fee. CySEC will inform the applicant within three months from the submission of the application, a time period which can be extended if necessary.

On the contrary, a RAIF in Cyprus is not itself licensed or authorised by CySEC, but it must always be managed by an authorised external manager (a full scope Alternative Investment Fund Manager). The sole requirement before the commencement of its operations is for the manager to notify CySEC within one month from the RAIF's establishment so that CySEC includes the RAIF in its special Register. Within one month from submission of the notification package, CySEC confirms the registration and the RAIF can raise capital. There is no minimum capital to set up a RAIF, but it must gather at least €500,000 in assets under management within its first 12 months.

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.