UCITS in Cyprus

In June 2012, Cyprus passed the Open-Ended Undertakings for Collective Investment Law to amend the older legislation and align it with the UCITS IV Directive. In this regard, a UCITS fund licensed in Cyprus may be sold, marketed or operate in any member state with no requirement for further authorisation. Similarly, a management Company licensed in Cyprus to manage UCITS is authorised to manage UCITS in any other member state

€200.000, per sub-fund for UCITS with an external manager

€300.000, per sub-fund for self-managed VCICs

Management Companies whose sole purpose is the management of UCITS, are subject to a minimum capital requirement of €125.000

If a UCITS is structured as a common fund, an external manager must be appointed, while if a VCIC, it may be self-managed by its Board of Directors. Either case, the assets of a UCITS must be held under custody.

An Open-Ended UCITS can take the following legal forms:

  • Variable Capital Investment Company (VCIC)
  • Common fund

The eligible depositaries for an open-ended UCITS include Credit Institutions, Investment Firms or an institution under prudential regulation and supervision, and recognised by the Member State as eligible to be appointed as depositaries.

The depositary of a UCITS is responsible for:

  • the safekeeping of UCITS assets by maintaining the register of its assets
  • the oversight of the UCITS regarding any subscriptions and redemptions, valuation of shares/units, timely settlement of transactions, profit distribution and the carrying out of the External Manager’s instructions
  • the effective and proper monitoring of the UCITS cashflows.
  • A  UCITS will be subject to Corporation Tax at 12.5% on the resulting net profits without any imposition of taxes on the net assets of the Fund.
  • Dividend Income and any profit generated from the trading of titles  are exempt from taxation in Cyprus
  • Interest Income received is considered for tax purposes as “active” income and is exempt for the Special Defence Contribution tax. Thus interest income is taxed as normal business income at 12.5% corporate tax on resulting net profits
  • No withholding tax on dividend distribution to foreign investors
  • In case of a UCITS with multiple compartments, each compartment is taxed separately, despite the fact that each compartment is not considered a separate legal entity.

The operation of a UCITS is subject to the prior granting of authorisation and notification of authorisation by CySEC, only if CySEC approves:

  • The relevant application;
  • The UCITS’ rules or instruments of incorporation;
  • The choice of external manager, or in case of internally managed VCIC, the persons who effectively shall conduct the business of the UCITS; and
  • The choice of the depositary.

ADVANTAGES

  • Operates on the principle of risk-diversification / risk-spreading
  • Low set-up and maintenance costs compared to other EU Jurisdictions
  • Simple and fast-track application process for licensing
  • Its Units are, at the request of investors, redeemed or repurchased, directly or indirectly, out of this undertaking’s assets
  • UCITS can be self-managed, subject to the approval of CySec
  • UCITS can be set-up as umbrella funds with multiple compartments, allowing the management of different pool of assets
  • The company of the funds can exploit the 50+ double Tax Treaties Cyprus has entered into.
  • No withholding tax on dividend distributions
  • No taxation of capital gains
  • Its regulations or instruments of incorporation must not limit the sale of its units only to the public in third countries

How Can we ASsist?

  • Incorporation and licensing services for the fund (Preparation of application for regulatory approval and monitoring)
  • Tax Advisory Services
  • Drafting of the fund prospectus and necessary agreements between relevant parties (fund manager, investment manager, custodians, investment advisers, bankers, registrars and company secretaries)
  • Fund Administration Services
  • Maintenance of Investor Registries
  • Arranging for the issue, transfer, allotment, conversion, redemption and/or purchase of shares
  • Accounting, management and investor reporting
  • Appointment of Non-Executive Directors