The ICIS Law of 1999 regulates private funds that are not open for the wide public.

This legislation regulates private funds not open for the wide public that allow no more than 100 investors, however the legislation will soon erase the limit on the number of investors.

There is restriction as to the investment scope of a private fund.

The relevant authority for the ICIS is the Central Bank, not the Cyprus Securities and Exchange Commission (CySEC). (New law is in draft paper which is expected to transfer authority to CySEC and to establish the framework for Alternative Investment Fund AIFs and Mutual Funds.)

A custodian is usually used, however since it is not mandatory for private funds, in the event it is not used the Central Bank needs to be satisfied that assets are adequately safeguarded.

There is no minimum subscription for a private ICIS.

An ICIS can take one of the following legal forms:

International fixed capital company

International variable capital company

International unit trust scheme

International investment limited partnership

Factors of setting up an ICIS are:

Flexible Investment Strategy

The regulations of UCITS IV do not apply therefore the fund can take any form the promoters decide to, such as an Equity Fund, Bond Fund, Hedge Fund, Property Fund, or a fund with general investment policy that can invest in several of the above.

Variable Capital

The ICIS works with variable capital and the 0.6% tax on capital increase does not apply.

Low Regulation

The fund is private therefore it has lower regulation and supervision compared to a public fund.

Set Up

The ICIS can be set up and be operational in a very short time (approx. 1-3 months).

Registration process

An ICIS must be approved by the Central Bank of Cyprus. In order to get the approval you need to submit to the Central Bank:

  • A completed application form
  • Questionnaires for all directors and people involved in the management of the fund.
  • An offering memorandum describing the scope of the fund, its legal form and the conditions for redemptions / subscriptions.

Taxation

ICIS are taxed as any other company in Cyprus.

No capital gains on disposal of securities.

Interest received is taxed at the corporate tax rate of 12.5%.

Absence of withholding taxes on dividend payments from Cyprus to non-residents

Favorable network of tax treaties with some 40 countries

Reduced deemed dividend distribution tax to Cyprus Resident investors to 3% from 15%

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.