If you want to open a hedge fund in Cyprus, you need to complete a few basic steps followed by applying for the appropriate license. We are at your service with tailored assistance if you want to open a hedge fund here.
| Quick Facts | |
|---|---|
| Applicable legislation | – Alternative Investment Fund Managers Law (AIFM), – Investment Services Law, – Open-ended Undertakings for Collective Investment Law(the UCITS Act), – the International Collective Investment Schemes Law, – the Investment Services Law |
Types of Cypriot hedge funds | – onshore, – offshore |
Types of investors addressed | Professional/qualified investors |
| Legal forms available for registration | – investment company, – common fund, – limited partnership |
| Registration stages | – investment company registration, – appointment of a fund manager, – authorization |
| Share capital requirements (if any) | The share capital depends on the type of entity used, where the minimum amount is EUR 50,000 for an Alternative Investment Fund with Limited number of People |
| Authorization requirements (if any) | Yes, with the Securities and Exchange Commission |
| Local manager required (YES/NO) | No, however, the manager must comply with the Alternative Investment Fund Management Directive |
| Registration timeframe (approx.) | 2 – 3 months |
| Types of assets to invest in | – commodities, – equity, – currencies (digital coins included), etc. |
| Possibility to operate abroad (YES/NO) | Yes, a Cyprus-based hedge fund can also operate abroad. |
| Taxation | When set up a as corporate form, the fund will pay the 12.5% corporate tax. |
| Advantages | – easy setup procedure, – possibility to operate on multiple markets, – it can use various investment strategies |
| Support in creating a Cypriot hedge fund (YES/NO) | Yes, we can assist with the establishment of a hedge fund in Cyprus. |
Table of Contents
What type of fund is a Cypriot hedge fund?
In Cyprus, a hedge fund can operate as:
- a Registered Alternative Investment Fund (RAIF): this type of investment fund is subject to specific authorization requirements;
- an Alternative Investment Fund (AIF): it addresses retail and professional investors, and is also subject to a Cyprus Securities and Exchange Commission licensing;
- an AIF with a Limited Number of Persons (AIFLNP): as its name says, this type of hedge fund will address a limited number of investors.
What types of hedge funds can I create in Cyprus?
Cyprus-based hedge funds can be categorized as onshore and offshore. The main difference between them consists of the types of investors they can be marketed to and the rules they are authorized under.
Feel free to address our Cypriot company formation agents for details on the differences between the two types of funds.
What are the main characteristics of hedge funds in Cyprus?
Hedge funds are preferred by many investors because they have a set of characteristics that favor their establishment and operation. Among these, the most important ones are:
- they can be operated on domestic and foreign markets, especially when it comes to a country like Cyprus, which is an EU member state;
- they can generate important returns for various types of investors;
- they are easier to create compared to other types of investment funds;
- they can use various investment strategies, from general trading to selective trading.
What are the main requirements to open a hedge fund in Cyprus?
You need to consider the following:
- the fund must have a legal address in Cyprus;
- it must also have a resident director and secretary;
- it can be managed by an internal or external Alternative Investment Fund Manager.
We also have an infographic on this subject:
What are the legal entities available for hedge fund setup in Cyprus?
The following:
- the common fund which must respect the conditions imposed by the Contract Law;
- the limited partnership which is broadly used in other reputable jurisdictions, such as Luxembourg and Liechtenstein;
- the investment company which falls under the supervision of the Company Law.
What are the documents to draft to open a hedge fund in Cyprus?
You need to prepare:
- a business and an operational plan;
- investment policies;
- investment manuals;
- proof of the minimum capital requirement, depending on the type of license required;
- details about the fund (local address, owners, directors, secretary);
- the organizational chart of the hedge fund;
- anti-money laundering and know-your-client regulations, in accordance with Cypriot and EU legislation.
How do I register a hedge fund in Cyprus?
The first step is registering the legal entity under which the fund will operate. Then, you must appoint the fund manager in accordance with the AIFM regulations, followed by authorization with the Cyprus Securities and Exchange Commission (CySec), which falls under the supervision of the Cypriot National Bank.
What is the minimum capital required to obtain a license for a Cypriot hedge fund?
The following minimum amounts are imposed by CySEC:
- EUR 50,000 for an AIFLNP;
- EUR 125,000 for an AIF.
There is no minimum amount imposed when the hedge fund is registered as an RAIF.
Here is also our video on this subject:
How long does it take to open a hedge fund in Cyprus?
The procedure can take between 6 and 8 months, depending on the type of structure used.
How are hedge funds taxed in Cyprus?
In terms of taxation, Cypriot hedge funds are taxed at a fund level and at the investor level, as follows:
- funds registered as investment companies are imposed the standard corporate tax rate of 15%;
- however, they can obtain tax deductions under Cyprus’ more than 60 double tax treaties;
- resident investors will be taxed progressively on the income they earn at rates ranging from 0% to 35%;
- a 3% Special Defense Contribution must also be paid.
On the other hand, Cyprus does not impose a capital gains tax, while dividend payments can be exempted from taxation under certain conditions.
If you want to know more about how to open a hedge fund in Cyprus, please contact our company registration advisors.