Taxation of Investment Funds in Cyprus

Updated on Thursday 30th November 2017

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After the introduction of different laws and regulations in connection to Alternative Investment Funds and Fund Managers in Cyprus in the last few years, this industry continued to increase on a constant basis. UCITS (Undertakings for Collective Investment in Transferrable Securities, a mutual fund based in the EU) and AIFs (alternative investment funds) are taxed as any other business in the country. In this article, our lawyers in Cyprus make a brief overview of the taxation of investment funds in Cyprus.

The main tax benefits of funds in Cyprus

The main tax benefits of investment funds in Cyprus are:

• No capital gains on the securities disposal;

• Interest paid is taxed at the corporate tax rate of 10%;

• There is no taxation on dividends paid by domestic companies or foreign ones;

• There is no withholding tax on dividend payments from the island to non-residents;

• No thin capitalization rules;

• Other tax benefits: our lawyers in Cyprus can provide more information on these other taxation advantages of funds in this country.

Taxation for UCITS and non-UCITS (ICIS) in Cyprus

The Cyprus general tax regime imposed on UCITS and non-UCITS (ICIS) is as follows:

• A group relief availability (75% holding). Our Cypriot lawyers can offer more details on this subject;

• Tax-free re-organizations (cross-border allowed);

• Exemption for overseas permanent establishment profits;

• Tax free corporate re-domiciliation;

• The possibility of setting up a SOCIETAS EUROPEA;

• All the EU Directives are applicable;

• Advanced ruling practice;

• A wide range of Double Tax Treaty network (more than 44 double taxation agreements).

The tax regime in Cyprus for investment funds also provides that:

• Taxation on local dividends is not levied;

• There is an exemption from tax on dividends paid by non-resident companies (upon very lenient criteria);

• There is an exemption from tax, both income and capital gains taxation, on the profit derived from the sale of securities such as shares, bonds or other types of financial instruments connected with equities;

• There is no withholding tax on income repatriation by the UCITS/non-UCITS (ICIS) to the non-resident unit holder;

• Other advantageous provisions: our attorneys in Cyprus can offer more details on what these other provisions consist of.

Investors who are interested in learning more about the taxation of Cypriot investment funds are invited to contact our Cypriot law firm for legal advice.