Cyprus has a favourable environment for opening an umbrella fund in the European Union. In order to set up an umbrella fund in Cyprus (RAIF) you don’t need any specialized license. Such funds are supervised by a licensed Alternative Investment Fund Manager (AIFM), which ensures quick and cost-effective opening of an umbrella fund in the European Union, since such a fund is managed by a fund manager who is a resident of any EU country.
Prerequisites for opening an umbrella fund remotely
If you want to create an umbrella fund in the EU remotely, you should carefully study the following registration features.
There are no formal requirements for the minimum capital of RAIF funds in the new Cyprus legislation. However, only “qualified investors” (Professional and / or Well-Informed Investors) can invest in such a fund, which essentially makes it inaccessible to the general public.
Under one umbrella
An umbrella fund can be organised and structured in such a way that it is represented by a group of isolated investment funds (or units) with centralized management, acting under a common market brand.
Although each unit is considered as a separate investment fund, all branches are a single legal entity. Therefore, there are no separate rules or constituent documents for each of them.
Specialized investment units are very convenient from the point of view of managing individual asset pools with different investment policies and investors.
We also would like to focus your attention on the fact that one investment branch can invest in another unit of the same umbrella fund. However, there are certain limitations here, which must be taken into account.
Opening an umbrella fund in Cyprus provides some flexibility in changing investment strategies. Depending on the legal form of the fund, it should be indicated in the fund’s constituent documents that this organization works with several investment departments.
If you want to set up an umbrella fund in Cyprus and open an account with a Cyprus bank, then carefully study the following points:
- The rights of unit owners in an investment unit (sub-fund) are formed only on the basis of the assets of a particular unit;
- Each investment unit is individually responsible for obligations arising from its charter, activity or dissolution.
For those who have made a decision to establish an umbrella fund in the European Union or in Cyprus remotely, the legislation of Cyprus suggests choosing among three legal forms - Common Fund, Investment Company, or Limited Partnership. We draw your attention to the fact that whatever legal form you select, the umbrella fund cannot act as a loan fund, or a money market fund, or a mutual fund.
Legislation recently approved by the Cypriot Parliament has corrected some taxation issues for local investment funds. The main tax innovation is that investment by a non-resident of Cyprus in a Cyprus tax-transparent investment fund, or management of the Cypriot manager by a foreign investment fund, will not be construed as a Permanent Establishment in Cyprus.
As a result, profits from investments in such funds will be taxed only in the country of which the investor is a resident.
In addition, for persons who are tax residents of Cyprus and permanently reside in this country, the rate of the Special Defense Contribution in relation to income received from local investment funds increases from 3% to 17%.
Legal support in establishing an umbrella fund
If you decide to open an umbrella fund in Cyprus remotely, we recommend that you entrust the fulfillment of this task to seasoned lawyers of IQ Decision.
Our staff will help you prepare all the necessary documents. We will also provide a tailor-made legal advice and support in the process of registering an umbrella fund wherever you choose.