Cyprus Permanent Residence & Alternative Investment Funds

Cyprus Permanent Residence Program (“PRP”)

In line with the Cypriot government’s intention to increase foreign investment and to help its economic development, Regulation 6(2) of the Aliens and Immigration Regulations allows the Ministry of Interior to issue residence permits to applicants from non-European countries who intend to invest in the republic.

Benefits

• The application procedure is highly efficient, with a high approval rate if all criteria are satisfied.

• It is not necessary to reside in Cyprus, but a visit once every two years is required.

• Dependents can be enrolled in high-quality private schools offering English language courses.

• Residence applies to the main applicant’s spouse and children under 25 years.

• The whole process can be arranged without being present in the country, except for biometric capturing.

• Successful applicants are eligible to apply for Cypriot citizenship after five years of residence.

Investment categories

The applicant must invest a minimum of €300,000 in one of the following categories:

i. Purchase up to two new immovable residential properties of a total market value of at least EUR 300,000 plus VAT, with the option to purchase from two different developers.

ii. Purchase up to two new or used immovable non-residential properties (offices, shops, hotels, or other developments) of a total market value of at least €300,000 plus VAT.

iii. Invest €300,000 in the share capital of a company registered and operating in Cyprus, which employs at least five people.

iv. Invest €300,000 in units of the Cyprus Investment Funds Association’s collective investments (AIF, AIFLNP, RAIF).

In addition to investing in one of the investment options described above, the investor must provide supporting evidence of a secured annual income of at least €50,000 deriving from abroad (an additional €15,000 is required for each dependent spouse and €10,000 for each minor child).

In case that the applicant chooses to invest as sections (ii) – (iv), his/her total income or part of it may also come from sources coming from activities within the Republic.

Cyprus Alternative Investment Funds (AIFs)

Cyprus, being one of the first EU countries to transpose the Alternative Investment Fund Managers Directive into national legislation and along with the ratification of the Cyprus Alternative Investment Funds Law, is fast becoming a leading investment fund centre in Europe for investment funds and asset management companies, offering direct access to key markets.

The AIF Law provides the opportunity to set up a versatile fund with broader investment strategy opportunities. An AIF is regarded as a collective investment undertaking, usually consisting of multiple investment compartments, which collectively raise capital from various investors, to invest it in accordance with a defined investment policy for the benefit of those investors.

The AIF presents fund promoters and investors with a flexible, cost effective and tax efficient fund solution to raise investments globally. AIFs can be structured to meet the requirements of fund promoters and investors across the whole spectrum of options in terms of licensing process, number of investors, requirement for Minimum Capital, Minimum AUM, who can undertake the Fund Management function and the depositary requirements. This flexibility and cost-efficiency make the Cyprus AIF a very attractive vehicle for collective investments and holding of multiple classes of assets.

The AIF Law allows for three types of AIFs to be established in Cyprus which are as follows:

▪ Alternative Investment Funds, with an unlimited number of investors (AIFUNI);

▪ Alternative Investment Funds of a limited number of investors (AIFLNI); and

▪ Registered Alternative Investment Funds (RAIF).

Registered Alternative Investment Funds - RAIF

A RAIF can take the form of a common fund, an investment company or a limited partnership. It is addressed only to professional and/or well-informed investors and it is externally managed. It does not require authorization by CySEC to commence operations as long as it is externally managed by an Alternative Investment Fund Manager (“AIFM”) established in Cyprus or in another Member State. However, the establishment of the RAIF must be notified to and approved by CySEC and its name be included in a special register maintained by CySEC.

Additional characteristics of the RAIF:

▪ May be open-ended or closed-ended;

▪ May have an unlimited number of investors;

▪ Is allowed to be set up as an umbrella fund, allowing the setup of multiple investment compartments ("sub-funds");

▪ No minimum capital requirements;

▪ Must invest at least €500,000 or currency equivalent within the first 12 months;

▪ There are no investment restrictions except of Money Market funds or Loan Origination Funds;

▪ It can be a Fixed Capital Investment Company (FCIC) or it may be a Variable Capital Investment Company (VCIC).

Alternative Investment Fund Manager (AIFM)

A licensed Alternative Investment Fund Manager (AIFM) will have to supervise the RAIF and provide certain mandatory services (risk management, compliance, internal compliance and audit). The AIFM can only be managed externally in Cyprus or in another EU Member States. A AIFM can also provide services such as portfolio management, risk management, oversight of depositary and all outsourced functions and the management of regulatory & internal reporting obligations.

Fund Administrator

The Fund Administrator is appointed by the AIFM to be responsible for taking care of the day-to-day administrative and back-office functions such as the accounting and bookkeeping services, keeping the unit holder books and records of the Fund, the processing of subscription and redemption applications, the calculation of the Net

Asset Value, the collection of income, distribution of profits, disclosure of information and services to the unitholders, regulatory compliance monitoring, maintenance of unit holder register, contract settlements including certificate dispatch and any other duties as required by applicable law and the Administration Agreement.

Fund Custodian

Every AIF must appoint a single and independent depositary, different from the external manager, which will be responsible to provide safekeeping, oversight and asset verification services in respect to the assets of the Fund and Sub-Funds in accordance with the AIF Law. The Depositary will also provide cash monitoring services in respect of the Fund’s cash flows and subscriptions. The Custodian can be a credit institution, a MiFID investment firm or other entity regulated and supervised as a Depositary in Cyprus.

Cyprus Permanent Residence by investing in AIFs

Obtaining the Cyprus Permanent Residence by investing in units of the Cyprus Investment Funds Association’s collective investments (AIF, AIFLNI, RAIF), can offer additional benefits, compared to property investments:

No VAT: VAT is not applicable when investing in AIFs compared to investing in new property, where a 5% VAT is applicable if this is the principal residence (subject to other conditions as well) and a 19% VAT otherwise.

No transfer Fees / Stamp Duty: Land Registry Transfer Fees and Stamp Duty are usually associated with investments in Property.

No Legal Fees: Usually, a property purchase involves the use of legal services, which can costly. No legal fees apply when investing in AIFs. No Capital Gains Tax (CGT): CGT is not applicable on the disposal or redemption of fund units, compared to the disposal of property, where a 20% CGT is applied (subject to certain deductions).

Diversification: Funds typically invest in a diversified portfolio of properties which can help spread the risk, reducing the impact of any single investment's performance on the overall portfolio.

Professionally Managed: Funds are managed by professional fund managers who have expertise in analyzing markets and making investment decisions.

Regulatory Oversight: Funds are regulated by financial authorities, providing investors with some level of protection and oversight. This can help ensure transparency and accountability in the management of your investments.

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