What Are Investment Funds?
Investment funds are financial instruments that pool capital from numerous investors to make collective, large-scale investments. Common types of investment funds typically include private equity funds, venture capital funds, distressed opportunities funds, real estate funds, mezzanine funds, funds of funds and hedge funds.
While investors retain full ownership and control of their shares, they do not decide how to operate the fund. Rather, the assets are managed by professional fund managers.
The pooling of investment capital and the use of expert management services allow investors to enjoy the benefits of lower risks and higher returns.
The Cyprus Success Story
The past decade saw Cyprus become one of the EU's leading investment fund jurisdictions. The figures speak for themselves: as of 30 June 2019, the local investment fund industry reached an all-time peak of €6.8 billion. The country further boasts 42 authorized Alternative Investment Funds (AIFs), 119 authorized AIFs with limited number of persons and 18 Registered AIFs.
This success is due to a mix of factors, including Cyprus' flexible and cost-efficient procedures, streamlined bureaucracy, and competent service workforce. Cyprus is a member of the European Securities and Markets Authority, and its legislation is fully in line with all relevant EU Directives, including the Alternative Investment Funds Manager Directive.
Cyprus' investor-friendly tax policy is undoubtedly another major contributing factor. Capital gains and dividend income of local tax resident funds are mostly tax-free. In addition, tax resident funds are eligible for all benefits under double tax treaties or EU Directives. There is also:
- No subscription tax on fund net assets
- No withholding tax on payments to non-residents
- No capital gains tax on disposal of shares or units by their holders
What's more, investment manager services are not subject to VAT and while interest income is taxable, the effective tax is greatly reduced by the notional interest deduction on new equity.
Savva & Associates Investment Fund Services
With more than a decade's worth of industry experience, Savva & Associates is one of the leading service providers in the field of both regulated and non-regulated investment funds in Cyprus. S&A's full-spectrum services include:
- Incorporation, licensing, and administration of Alternative Investment Funds (AIFs)
- Licensing and administration of Undertakings for the Collective Investment in Transferable Securities (UCITS) and regulated fund management entities
- Incorporation and administration of non-licensed funds
- Drafting of fund prospectus
- Drafting of contractual agreements between fund and investment managers and bankers, company secretaries, custodians, investment advisors, and registrars
S&A's experts also manage all communications with the competent authority, the Cyprus Securities and Exchange Commission (CySEC).
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.