The enactment of the Alternative Investment Funds Law of 2018 earlier this year, has enabled the possibility to set up Registered Alternative Investment Funds ("RAIF") in Cyprus.
RAIFs are not authorised by the Cyprus Securities & Exchange Commission ("CySec") and as a result, there is no requirement for licensing or authorisation by CySec which in its turn significantly shortens the time to market.
As a result, the regulation responsibilities for a RAIF are transferred to the RAIF's manager, who is responsible for ensuring compliance with the applicable laws and regulations.
The RAIF manager should be an AIF Management company authorised under the AIF Managers Law (being the local transposition of the EU AIFM Directive). In certain cases, the AIF Law permits the management of a RAIF to be carried out by other licensed entities (such as investment firms or UCITS management companies).
A RAIF can take various types of legal forms (i.e. mutual fund, fixed/variable capital investment company or limited partnership, with or without legal personality) and can only be marketed to well-informed and/or professional investors.
A RAIF can be open or closed ended and can be setup with segregated sub-funds. Depending on the nature of its investments and the type of investors it is marketed to, the RAIF may be subject to some investment restrictions and investment diversification rules.
The appointment of a Depositary is mandatory. While there is no requirement for a minimum initial capital, the RAIF should raise at least EUR 500,000 from investors within 12 months of registration on the Registry.
From a tax perspective, if setup as a fixed/variable capital investment company, the RAIF should qualify as a tax resident in Cyprus (assuming that its management and control are exercised from Cyprus) and would be able to benefit from the attractive corporate tax regime of Cyprus. Alternatively, if the RAIF will take the legal form of a limited partnership or a mutual fund, then it will be tax transparent and no Cyprus tax will apply at the level of the RAIF.
Savva & Associates is one of the few experienced providers in Cyprus in the establishment and administration of alternative investment funds, and we are also one of the most cost efficient firms 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 establishment, licensing and ongoing management of AIFs.
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.