The importance of promoting Cyprus in key strategic markets with proximity to it can be said in the case of the Middle East, North Africa, otherwise known as MENA region. Cyprus clearly possesses comparative advantages versus other EU jurisdictions and has all the ingredients to be considered as a gateway for investment outflows from the MENA region to Europe, as well as other high growth markets such as Russia and China.
The main reasons for this are outlined below:
1. Cyprus has transposed all the relative EU directives for investment funds such as UCITS IV and AIFMD and has also a new Alternative Investment Funds (“AIF”) law to accommodate such collective investment schemes
2. it has now a single regulator for investment funds which is the Cyprus Securities and Exchange Commission
3. the proximity to Cyprus to the MENA region makes the use of the Cyprus investment funds platform an attractive option for investors, funds and asset managers
4. the already excellent business and investment ties between Cyprus and the countries in the MENA region
5. the existing and increasing network of over 55 Double Tax Treaties that Cyprus has with other countries globally
6. the sound legal system which is based on the UK Common law; 7. The competitive tax system
Cyprus’ practical solutions for MENA Investors / Investment Funds/ Asset Managers Cyprus can be an option for MENA investments, investment funds and asset management companies that want to invest through:
1. UCITS investment funds
2. Alternative Investment Funds
3. PE/VC Investments in different sectors such as Energy, Banking & Financial Services, Shipping, Real Estate Projects, ICT, Education, R&D (see diagram 2)
4. The setup of an investment firm or asset management company (CIF, AIFM, UCITS ManCo)
Taxation
Cyprus offers one of the most competitive tax regimes in Europe and has an extensive network of double taxation treaties (DTTs) with more than 50 countries. Cyprus is also included on the OECD ‘white list’, and since its accession to the European Union in 2004, the country’s regulatory regime is in full compliance with EU tax directives. This coupled with one of the lowest corporate tax rates in the EU at 12.5%, places Cyprus high on the list of preferred jurisdictions for international tax planners.
The island is also increasingly becoming a destination of choice in the EU for Fund Managers and Management Companies for the following reasons:
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35% cap on personal income tax
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12.5% corporate tax
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gains from trading in securities including shares and financial instruments are tax exempt
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flexible regulations
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substantial lower operating costs than other EU fund centres. Cyprus is continuously upgrading its tax laws in a bid to support the development of its already established international financial and business centre and to attract international investment. Cyprus’s tax regime has been amended to provide further tax incentives for the set up and operation of funds. These provisions include:
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interest received by open and closed end collective investment schemes is considered ‘active’ interest income and taxed only at 12.5% corporate tax (no defence tax)
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no minimum participation on inbound dividends to qualify for tax exemption
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the liquidation of open and closed end collective schemes is not taxable if the unit holders are not tax residents of Cyprus if Cypriot tax resident investors have invested in a fund, there is a 3% defence tax on deemed dividend distribution on 70% of the collective investment scheme accounting profits within a two-year period from the tax year to which the profits relate, prorated to those profits attributed to the Cypriot investors
Fund taxation
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Corporation tax at 12.5% on profits
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Excluded from tax:
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dividends received
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gains arising from the trading in securities
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capital gains arising from sale of property abroad
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capital gains from sale of shares of foreign property companies
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no subscription tax on the net assets of the fund
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effectively only interest received is taxed at 12.5%
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fund management services provided to alternative funds are not subject to VAT
With references to: CIFA Newsletter, March 2015
More information:
Do you want to establish a company in Cyprus? Our
Cyprus company formation page explains it all.
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Cyprus bank account opening and
Eurobank Cyprus online banking.