YOU INVEST, WE SET UP.YOU DEVELOP, WE ADMINISTER.

CYPRUS FUNDS LEGISLATION AMENDMENT

As a first step to the modernisation of the Cyprus Fund’s legislation, on 10 July 2018 the House of Representatives of Cyprus voted the highly anticipated amendments to the Alternative Investment Funds which amongst others, enables the setup of the Registered Alternative Investment Fund (“RAIF”).

Much like manager led fund structures available in other European jurisdictions, the Cyprus RAIF is an unregulated fund, moving the regulation of the structure from product focused to management focused, in the footsteps of the current regulation trend in Europe.

The RAIF, despite being unregulated, it maintains the AIFMD passporting capability within Europe based on the license of the appointed manager. The product is available to well-informed and professional investors, with no maximum number of investor or assets under management limitation, and can be open or closed ended. The RAIF’s asset will need to be under the custody of a local depository which can be a financial institution such as a bank or a licensed Cyprus Investment Firm while it can maintain its bank accounts anywhere in the world, with the consent of the appointed depository.

ENACTMENT OF THE CYPRUS REGISTERED ALTERNATIVE INVESTMENT FUND

Through the amendment of the Cyprus Partnership Law, the capability is now offered to fund managers of electing whether a Limited Partnership will constitute a separate legal entity or not, while maintaining its tax transparent status.

This enables fund managers to:• Elect to have a self-managed or externally managed

partnership as a vehicle;

• Utilise a Cyprus partnership to act as a fund of funds vehicle;

Further, a “safe harbour” list is established setting out the activities that a Limited Partner may undertake without jeopardising their limited liability status.

LIMITED PARTNERSHIP WITH LEGAL PERSONALITY AND SAFE HARBOUR

HIGHLIGHTS

• No licensing or authorisation required by CySec;

• May be addressed only to Professional/Well-informed investors;

• Not subject to minimum capital requirements;

• No investment restrictions apply but cannot be set up as Money Market Fund, Loan Origination Fund or Fund of Funds;

• Can be open or close ended;

• Obligation to appoint a Depository.

• Unlimited number of investors

Legal Form

• Variable Capital Investment Company (“VCIC”);

• Fixed Capital Investment Company (“FCIC”);

• Limited Partnership (“LP”);

• Common Fund (“CF”);

Management

• Alternative Investment Fund Manager (“AIFM”) licensed in the EU;

If the fund is set up as a Partnership and 70% of its assets are illiquid, then can also be managed by:

• UCIT Manager licensed in the EU;

• Cyprus Investment Firm (“CIF”);

• Mini-manager (*in process of enactment);

TAX LEGISLATION UPDATES

On the same date, the members of the parliament also enacted the following tax updates related to funds:

• Investments in tax transparent Cyprus AIFs and management from Cyprus entities of non-Cyprus AIFs will not constitute a permanent establishment in the Republic;

• Election of variable remuneration of senior management of AIFMs which is based on profits of managing entities to be taxed at 8%, with a minimum annual tax charge of Eur 10,000;

• Each segregated compartment of umbrella funds will be treated as a separate tax entity, enhancing the segregation of liabilities of umbrella fund structures;

• Cyprus tax residents investing in AIFs or UCITS will be treated the same way as if they have invested in any other Cyprus entity in terms of Special Defence Tax from Deemed Distribution.

© A

lter

Do

mu

s 20

18

www.alterDomus.com

YOU INVEST, WE SET UP.YOU DEVELOP, WE ADMINISTER.

ALKIS KAILOSCountry Executive CyprusAlkis.Kailos@alterDomus.com

CONTACT US

EXPECTED CYPRUS FUND LEGISLATION UPDATES

Further to the current updates, there’s a pipeline of modernizing fund laws coming up, expected to further upgrade the jurisdiction as an ideal domicile for new structures within Europe. In particular these are:

• The Mini-Manager, a lightly regulated management scheme that will be applicable to emerging or existing managers with AUMs lower than the AIFMD threshold (thresholds being up to Eur 100 million of AUM including assets acquired through leverage or up to Eur 500 million of AUM when the AIF is unleveraged).

• The Mini-Manager will be eligible to manage sub-threshold

AIFs, AIFs for Limited Number of Persons as well as RAIFs that are set up as Partnerships with at least 70% of their assets placed in illiquid positions.

• In an effort to push the industry forward, Cyprus will be regulating fund administration services under the Cyprus Securities and Exchange Commission.

• The new regulation is expected to require fund administration service providers to each have a minimum number of dedicated professionally qualified employees, advanced software solutions both for record keeping as well as disaster recovery, “fit and proper” attestation of directors and minimum capital requirements as well as other requirements.

WE’RE WHERE YOU NEED US

Alter Domus (Cyprus) Ltd11 Limassol Avenue • Galatariotis Building2112 Nicosia • CyprusT +357 22 465151

EVDOKIA STAVRAKI-STEPHANOUDirectorEvdokia.Stavraki-Stephanou@alterDomus.com

GEORGE KARATZIASSenior ManagerGeorge.Karatzias@alterDomus.com