Investment Funds

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  • Cyprus Investment Funds

    The tax and regulatory synergies are now in place to attract not only the funds themselves but also fund managers and investors. Funds and fund managers wishing to enjoy the benefits of cross border EU opportunities are starting to look at Cyprus as a credible alternative to more expensive traditional fund jurisdictions such as the UK, Ireland and Luxembourg. An EU member state since 2004, Cyprus is ideally placed to act as a facilitator to raise funds intra EU and maximize returns for investors at low cost and enhanced tax efficiency.

    Types of Funds in Cyprus The UCITS (Undertakings for Collective Investment in Transferable Securities) are regulated funds that can be offered to the public at large. These funds can be sold across the EU subject to a brief registration procedure with each country regulator.
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    Alternative Investment Funds or Non UCITS(as per meaning of UCITS IV Directive) and fall under the AIFMD (Alternative Investment Fund Managers Directive) set to be implemented across EU from 2013. Examples of such funds are Hedge Funds, Commodities Funds, Funds of Funds, Real Estate Funds etc.
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    Cyprus Funds Taxation UCITS and ICIS and soon AIF’s are taxed as any other company in Cyprus.
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    Cyprus Funds & EU Legal Framework The fact that the schemes are supervised by responsible regulatory authorities aims to ensure that the involved parties meet the minimum requirements set by law, and that unit holders’ assets are handled with reasonable care and transparency, for the incomes and confidence of the promoters, unit holders and beneficiaries.
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  • Fund Registration Malta

    Having already a great number of established retail funds, hedge funds and UCITS, Malta is regarded as a leading jurisdiction for funds registration. A number of important factors have contributed to this success.

    • Low set-up costs and availability of high-educated and experienced financial services professionals;
    • Presence of reputable service providers;
    • A single, flexible regulator – the Malta Financial Services Authority (MFSA);
    • Fast-track approval processes;
    • Possibility of re-domiciling or migrating existing hedge funds from other financial centres to Malta, thereby ensuring a seamless continuity of the fund and its investments;
    • Extensive double-tax treaty network;
    • EU Passport allowing for the promotion of the funds in all EU member states;
    • Ability to use Special Purpose Vehicles;
    • Only EU member states with a full imputation system of taxation – for example, a Maltese fund manager that is incorporated as a company and tax resident in Malta will be subject to tax in Malta on its taxable profits on a worldwide basis at the flat tax rate of 35%. However, upon distribution of dividends to its non-resident shareholders, these shareholders would be entitled to a refund of six-sevenths of the advance corporation tax that has been paid (after the refund the actual tax paid would be of 5%, for example);
    • Cost-competitive centre where office space and human resources are two-thirds the cost of other European jurisdictions;
    • Highly qualified and multilingual staff;
    • A strong telecommunications network;
    • All business is conducted in the English language, providing international clients with a more comfortable working environment
    • Strategic Eurozone Location.

    Fund entities registered in Malta are referred to as Collective Investment Scheme (“CIS”). This term is generic and it refers to any scheme or arrangement which has as its object the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange.

    How can a Collective Investment Scheme be established in Malta?

    1. As an investment company constituted by Memorandum and Articles of Association (i.e. SICAVs and INVCOs);
    2. As a commercial partnership constituted by means of a partnership deed;
    3. As a unit trust constituted by a trust deed between a management company and a trustee (regulated by the Trusts and Trustees Act);
    4. As a mutual fund established by way of contract (otherwise referred to in civil law jurisdictions as “fond commun de placement”);

    Types of Schemes

    Professional Investor Fund (PIF)

    Professional Investor Funds (PIFs) are a type of collective investment schemes which fall within the provisions of the Investment Services Act, 1994. They provide more flexibility than UCITS and other retail funds which are also licensed by the MFSA and are subject to minimal regulation compared to regular investment schemes. Their only activity is operating as a PIF which does not itself carry out any investment services licensable activity.

    The PIF’s are divided as follows:

    • PIFs promoted to Experienced Investors – minimum investment threshold of EUR 10,000 or equivalent in any other currency;
    • PIFs promoted to Qualifying Investors- minimum investment threshold of EUR 75,000 or equivalent in any other currency; and
    • PIFs promoted to Extraordinary Investors- minimum investment threshold of EUR 750,000 or equivalent in any other currency.

    UCITS funds

    Undertakings for Collective Investment In Transferable Securities, or UCITS, are essentially CISs which, having satisfied those additional legal and regulatory requirements set out in the UCITS Directive and which may avail themselves of a larger market for the sale of their units by “passporting” their units into any EEA or EU member state without the requirement of licensing in each new member state. Conditions. In order to qualify as a UCITS fund, a scheme must satisfy the following requirements:

    1. It must have as its sole object the collective investment of capital raised from the public in transferable securities (e.g. shares in companies, securities equivalent to shares in companies, bonds and other debt securities and other negotiable securities) and/ or in other liquid financial assets, and be operated on the principle of risk-spreading;
    2. The units in the fund must be capable of repurchase or redemption at holders’ request directly out of those undertakings’ assets (which effectively disqualifies closed-ended schemes);
    3. It must be constituted as a mutual fund or other equivalent contractual scheme, managed by a management company, an investment company/ limited partnership with variable share capital, or a unit trust;
    4. The units in the fund are to be promoted for sale to the public within the Community and must not have any prohibition under the trust deed or the investment company’s articles;
    5. Must conform with the UCITS Directive.

    Additionally, Malta-based UCITS must satisfy the requirements and procedures set out in the Undertakings for Collective Investment in Transferable Securities and Management Companies Regulations.

     

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