Foreign investors who come to Cyprus can set up businesses in various industries, however, the financial one remains one of the most appealing, mainly because of the numerous opportunities it offers.
For example, one of the most attractive types of investments to make is to open an investment fund in Cyprus. The legislation and the taxation system favor qualified and non-professional investors who can create hedge funds, one of the fastest ways of obtaining high returns in a short period of time.
Below, our company formation agents in Cyprus explain how to open a hedge fund. We are at your service with tailored assistance if you want to open a hedge fund in Cyprus.
Table of Contents
The main characteristics of hedge funds
Hedge funds are preferred by many investors because they have 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 to various types of investors;
- they are easier to create compared to other types of investmentfunds;
- they can be use various investment strategies, from general trading to selective trading.
If you decide to open a hedge fund in Cyprus, you need to respect several laws.
The main laws providing for those who want toopen a hedge fund in Cyprus
In order to set up a Cypriot hedge fund, an investor must first get acquainted with the legislation governing it and the requirements to respect. From these points of view, Cyprus has strict regulations and imposes specific conditions when it comes to creating any type of fund.
With the respect to the laws that need to be respected when opening a hedge fund, here are the most important:
- the Investment Services Law;
- the International Collective Investment Schemes Law;
- the Alternative Investment Fund Managers Law (AIFM);
- the Open-ended Undertakings for Collective Investment Law(the UCITS Act);
- the Transparency Laws;
- the Consolidated Market Abuse Law;
- the Prevention and Suppression of Money Laundering Activities Law.
Apart from these, there are also several EU directives that can must be respected but which offer numerous facilities in terms of operating in all EU countries.
Our Cypriot company formation consultants can provide more information on the laws governing hedge funds.
Legal forms that can be used to create a hedge fund in Cyprus
Apart from the laws that need to be respected if you want toopen a hedge fund in Cyprus, one must also know the types of legal entities that can be used to operate on this market. Among these, the following are the most employed:
- 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.
It should also be noted that Cyprus-based hedge funds can be categorized as onshore and offshore. The main difference between them consists in the types of investors they can be marketed to and the rules they were authorized under.
If you want to open a hedge fund, our specialists in Cyprus are at your disposal with quick and reliable services so you can enjoy your investments in a timely manner.
Steps to createopen a hedge fund in Cyprus
The establishment of any investment fund in Cyprus implies respecting a simple procedure, as it is made of just a few steps. The first one is registering the legal entity under which the fund will operate. Then, the investor 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.
Out of all these steps, the authorization takes the longest, as there are various documents to verify.
Taxation of investors in Cypriot hedge funds
In terms of taxation, Cypriot hedge funds are taxed a fund level and at investor level, as it follows:
- funds registered as investment companies are imposed the standard corporate tax rate of 12.5%;
- 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 toopen a hedge fund in Cyprus, please contact our company registration advisors.