Cyprus Alternative Investment Funds (AIFs) and taxation of Cyprus Alternative Investment Funds (AIFs)

1.  Types of Cyprus Funds (AIFs)

Under Cyprus Alternative Investment Funds (AIFs) Law there are three types of AIFs that can be established in Cyprus:

  • Alternative Investment Funds with Limited Number of Persons (Up to 50) (AIFLNPs)
  • Alternative Investment Funds with Unlimited Number of Persons (AIFs)
  • Registered AIFs (RAIFs)

The various types of Cyprus Alternative Investment Funds (AIFs) can further have the form of:

For Alternative Investment Funds with Limited Number of Persons (Up to 50):

  • Variable Capital Investment Company (VCIC)
  • Fixed Capital Investment Company (FCIC)
  • Limited Partnership (LP)

For Alternative Investment Funds with Unlimited Number of Persons (AIFs) and Registered AIFs (RAIFs):

  • Variable Capital Investment Company (VCIC)
  • Fixed Capital Investment Company (FCIC)
  • Common Fund (CF)
  • Limited Partnership (LP)

2.  Taxation of Cyprus Funds

  • Funds that are managed and controlled in Cyprus are tax residents in Cyprus and are subject to the general provisions of the Cyprus tax.
  • In the case of Cyprus funds which have compartments, each compartment is taxed separately.
  • Subject to conditions and depending on the legal form of the fund, some funds may be transparent for tax purposes.
  • There is no Cyprus Capital Gains Tax on the gains arising from the disposal or redemption of units in Cyprus funds unless the Cyprus fund owns immovable property in Cyprus. In cases of immovable property-rich funds in Cyprus, no Capital Gains Tax arises if the Cyprus Fund is listed on a recognized stock exchange.
  • Based on the Cyprus tax legislation no Cyprus permanent establishment will be deemed to arise:
    • for non-Cyprus resident investors as a result of investment into Cyprus tax-transparent investment funds, or,
    • as a consequence of the management from Cyprus of non-Cyprus investment funds.
  • The management fee charged for the provision of collective management services to Cyprus investment funds is exempt from VAT, provided certain conditions are met.

Certain employees and executives of certain investment fund management companies or internally managed investment funds may opt for a different type of personal taxation subject to conditions.  Their variable employment remuneration which is effectively connected to the carried interest of the fund managing entity may, through an annual election, be subject to Cyprus tax at the flat rate of 8%, with a minimum tax liability of €10.000 per annum. The special type of taxation is available for a period of 10 years

How Can We Help

Please contact us to share any questions you have about the above topic

Contact details

Tel. +357 22 340000

Email: [email protected]

The authors expressly disclaim all and any liability and responsibility to any person, entity, or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly, no person, entity, or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.