€300,000. At this threshold, an investment in a Cypriot fund can become more than a financial decision—it can also serve as a pathway to obtaining permanent residency in Cyprus. Many foreign investors are initially unaware of this dual benefit, discovering the residency implications only as they explore the Cypriot investment fund regime in greater depth.
This growing interest is underpinned by several factors, including a stable regulatory framework aligned with EU legislation and comparatively lower operating costs than many other financial centres within the European Union. As a result, Cyprus has emerged as an increasingly attractive jurisdiction for investment funds, with assets under management having quadrupled in less than a decade. The jurisdiction’s appeal is further reflected in the presence of global financial institutions such as Mitsubishi UFJ Financial Group, which has selected Cyprus as a base for providing investor services.
Cyprus attracts investors and managers through its competitive costs, flexible and effective legislation, strategic proximity to the Middle East and Africa, and longstanding preferential access to Eastern and Central Europe. Subject to conditions, the variable employment remuneration of employees and executives of investment fund management companies or internally managed investment funds, which is effectively connected to the carried interest of the fund managing entity, may be subject to Cyprus tax at the flat rate of 8%, with a minimum tax liability of EUR 10,000 per annum. This special mode of taxation is available for a period of ten years in total, subject to the annual election of the individual, and is not added to any other income. Management services offered by a fund manager are fully exempt from VAT. The benefits extend beyond individual income at the fund level: dividends are taxed at 5%, forex differences are tax neutral for Corporate Income Tax (“CIT”) purposes (i.e. forex gains are not taxable and forex losses are not deductible) (but forex differences arising from trading in foreign currencies and related derivatives are subject to CIT), gains from cryptocurrency transactions are subject to income tax at the flat rate of 8%, all interest income earned by companies is subject to CIT at the rate of 15% and exempt from Special Defence contribution (“SDC”). Beyond taxation, there is a more tangible reason why an increasing number of asset managers are turning to Cyprus: operating costs, which remain 30–50% lower than in the established hubs of Luxembourg and Ireland. In closing, it is worth noting that Cyprus’s legal system itself, based on English common law, serves as an additional guarantee of predictability for international investors.
Another advantage is the EU passporting capability which allows a fund registered in Cyprus to be marketed throughout the EU with a single notification. It is therefore not surprising that asset managers from India, Israel, and Japan have already chosen Cyprus as their European headquarters, while for British asset managers, who lost direct access to the single market after Brexit, this same solution reopens the path to the European market.
How We Can Assist
Our team advises fund promoters, investment managers and international investors on the establishment and operation of Cyprus investment funds and related migration matters.
Our services include:
- advising on the most suitable fund structure;
- assisting with fund formation and regulatory compliance;
- preparing and submitting applications to CySEC;
- advising on migration requirements connected with fund investments; and
- liaising with the relevant authorities throughout the approval process.
For further information on Cyprus investment funds, please contact our team.
