Forming Funds in 2016

Starting from consulting services to facilitate the decision making process of what type of fund should be incorporated
according to the individual needs and preferences of each client, following to the preparation and submission of the application packages for the granting of a license from the Cyprus Securities and Exchange Commission, and finally to the provision of any other services necessary for the efficient operation of the Fund. PwC operates as a “one-stopshop” for Funds and Fund Managers.

PwC has a wealth of experience in servicing international clients in the financial services industry. Partners and members of staff of the Firm are actively participating on the Board and sub-committees of the Cyprus Investment Funds Association (CIFA), which aims to promote the local fund’s industry. In cooperation with CIFA and other local market players, PwC is engaged with the enhancement of the local legislation for funds. Changes in the fund’s regulatory environment.

World-class asset management companies and Alternative InvestmentFunds (AIFs) may serve many different markets, but they have one thing in common: they understand that regulatory compliance and transparency are becoming an important element of the new business environment. It is expected that AIFs will spend a bigger portion of their time and resources over the coming years figuring out how to address regulatory matters. At the same time, it is also important to highlightthat regulatory pressures and calls for additional transparency create opportunities for AIFs to enter in new markets which were previously dominated by financial institutions (i.e. P2P lending etc.). To help market participants plan for the future, we have considered the likely changes in the alternative asset management industry landscape over the coming years and identified key areas of success. Our regulatory compliance experts can help interested parties to navigate the regulatory maze.

The Cyprus funds market
Over the last couple of years, Cyprus has developed as a regional domicile for investment funds and asset managers, and coupled with its competitive strategic location, it has become the most accessible bridge for managers from the Middle East, Asia and the CIS region to enter the EU funds’ industry. Furthermore, the local Alternative Investment Funds (AIF) Law which came into effect in July 2014 provides a level playing field along the lines of the frameworks of the main European investment fund hubs. It is thus apparent that Cyprus’ competitive position is significantly strengthened.

A noteworthy increase of funds applications has been observed which is very positive for the industry as it means that customers have surpassed the point where they remained at the decision making process and have now proceeded to the implementation stage. Given the breadth of options provided by the AIF legal framework, various types of funds can be set up in Cyprus, a fact that has already been recognized and appreciated by investors (both local and foreign) and is already being exploited.

Why set up a fund in Cyprus? Cyprus offers the full spectrum of legislative framework to all fund products (UCITS and non UCITS). In particular, it provides fund managers to structure as Alternative Investments Fund Managers, as presented in the relevant EU directive, or a MiFID compliant Investment Firm, both offering EU “passporting” ability. Cyprus is a well-regulated EU member state, combines tax efficient features of a modern financial centre with the necessary infrastructure for the funds’ industry. It has a UK based legal system, independent judiciary and friendly business environment. Furthermore, in Cyprus there is a low cost base, efficient and investor friendly government authorities with minimal red tape.

On a tax perspective, according to the taxation system in Cyprus, no withholding tax applies on distributions to investors and no taxation of capital gains. Also the services provided by the Investment Manager of the fund are not subject to VAT, hence the value base of the fund is not eroded with a non-recoverable cost. Moreover, the company legal form for a Fund can take advantage of the double tax treaty network of Cyprus.

Alternative Investment Fund with limited number of persons
Private investors may choose to set up an Alternative Investment Fund with limited number of investors (AIFLNP). It can take one of the following legal forms:
• Fixed or Variable capital company;
• Limited Liability Partnership.

The number of investors in the AIFLNP may not exceed 75 and they need to be well-informed/professional investors.

The Law allows the establishment of an AIFLNP with various investment compartments, each one of which will have its own investment policy. However, the limitation on the number of the investors is applicable to the whole scheme. In addition, exceptions may apply in the need to appoint a manager or/and custodian.

The main benefits of an AIFLNP include the fact that there are no restrictions on the type of investments of the fund, there is no defined minimum initial capital requirement and no onerous ongoing reporting requirement to the Regulator.

Company: PricewaterhouseCoopers Ltd
Web Address: www.pwc.com.cy
Name: Chris Odysseos
Email: [email protected]
Telephone: 00357 22 555000
Name: Maria Athienitou
Email: [email protected]
Telephone: 00357 22 555000