Amendment to the law regulating the Alternative Investment Funds and the Income Tax Law

The law regulating the alternative investment funds (“AIF(s)”), namely the Alternative Investment Funds Law (131(I)/2014) of 2014 as amended, has been repealed and replaced by the Alternative Investment Funds Law (124(I)/2018) of 2018, following its publication to the official government Gazette of the Republic of Cyprus.

The amending law introduces a plethora of advancements to the old law, one of the most important being the establishment of a new form of AIF, known as the Registered AIF or RAIF (the “RAIF(s)”). A RAIF is externally managed, addressed only to professional and well-informed investors and has a depositary appointed. RAIFs may be incorporated and operate as mutual funds, limited partnerships or investment companies which can be open or close ended, stand alone or within an umbrella structure.

The most noteworthy feature of RAIFs is that they are not required to obtain an authorisation/licence by the Cyprus Securities and Exchange Commission (“CySEC”) in order to operate in Cyprus, a mere notification to CySEC is sufficient, following which, the RAIF will be entered into a registry maintained by CySEC. As a result, the incorporation process of RAIFs is fast and implements low incorporation costs.

In light of the introduction of the RAIFs into the amending law, the definition of the term “permanent establishment” included in article 2 of the Income Tax Law of 2002 (L118/(1)/2002) has been amended to clarify that investments in a mutual fund or partnership operating in accordance with the provisions of the amending law made by individuals not qualified as residents of the Republic of Cyprus, do not create a permanent establishment in Cyprus with respect to the investment.

We remain at your disposal should you require any further assistance.

* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render legal advice.

The author of the article is Sophia Stylianou.

Sophia is a legal consultant at Royal Pine & Associates. She is a qualified lawyer with experience in the corporate field and an admitted member at the Cyprus Bar.

Posted on Jan 08, 2019

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