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Interantional Collective and Investment Schemes

LEGAL FRAMEWORK

The ICIS legislation (ICIS Law 47(I) 1999) was introduced in 1999.

The Central Bank of Cyprus has been designated as the regulatory and supervisory authority for the establishment and regulation of ICIS.

DEFINITION AND OBJECT

The main aim of an ICIS is the investment of funds in order to spread the investment risks and enable the investors in the scheme to receive profits or gains from the acquisition, holding, management or disposal of investments.

The Units issued by the ICIS Fund can be redeemed or repurchased, at the option of the unit holder in accordance with the information memorandum prepared by the Fund Manager adopted by the unit holders when they decided to invest in the scheme.

The investors are not exercising a day to day management on the funds, as the scheme is managed and controlled by the Fund Manager.

LEGAL FORMS

Fixed Capital Company
The share capital of the Company is fixed from the beginning and the unit holders have to buy or sell their shares in order to enter or leave the scheme. Most of the times the scheme runs for a specific and fixed period of time and dissolves thereafter to distribute the capital and profits to the unit holders.

Variable Capital Company
The share capital of the Company may increase or decrease when new or existing investors are willing to enter or exit the scheme, on the basis of a NAV valuation at pre-determined periods as outlined in the information memorandum prepared by the Fund Manager adopted by the unit holders when they invested in the Fund.

Unit Trust Scheme
The Unit Trust Scheme is constituted by a written instrument under seal (the “Trust Deed”) made between the Manager, the Trustee and the unit holders.

The Trust property is held by the Trustee for the benefit of the unit holders in proportion to the units owned by them.

The funds forming part of the deposited property of the Trust shall be invested by the Trustee on behalf the Trust at the direction of the Fund Manager who is responsible for the investment decisions in accordance with the Trust Deed.

Investment Limited Partnership
A General Partner is appointed and usually is a corporate entity established in Cyprus, who acts as the manager of the scheme and who is responsible for any debt and obligations of the scheme that may arise.

The limited partners, have limited liability and do not take part in the conduct of the business of the scheme or have the power to contract on behalf of the Investment Limited Partnership.

All contracts, deeds, instruments, letters and documents are drafted, signed and executed by the General Partner of the partnership.

Clients

The ICIS are suitable for:

- financial services companies,
- fund managers,
- Investment firms and
- Groups of high net worth individuals with a common investment goal.

Investment objectives

Real Estate Fund
Portfolio consisted of investments owning securities offered by real estate-related companies but may also include direct property and other property interests.

Private Equity Funds
Invests in securities, bonds and other financial instruments that focus on a particular sector, such as information technology, utilities or retail stocks, others concentrate on companies located in a particular geographical area.

Funds of Funds
Invest in other hands. The Master / Feeder structure. A Cyprus fund may invest 100% of its assets (the feeder fund) in a foreign fund (the Master Fund).


Requirements
  Private   Experienced Investors
     
Investment
Restrictions
Not requirement for the application of the investment restrictions as set out in the Regulations issued by the Central Bank of Cyprus With the prior approval of the Central Bank of Cyprus not apply all or any of the investment restrictions as set out in the Regulations issued by the CBC.
     
Minimum
Subscription
No minimum USD$ 50.000
     
Minimum Capital
Requirements
No minimum USD$ 100.000 for fixed capital companies only
     
Issue of
Bearer Units
Prohibited Prohibited

Taxation
The major tax advantages are presented below:
  • Exemption on dividends;
  • Exemption on gain from sale of securities;
  • No withholding tax on the repatriation of dividends;
  • No capital gains tax on disposal of shares/ units by the shareholders;
  • Interest income received is considered ‘active’ interest income and taxed at 10% corporate tax;
  • Liquidation is not taxable if the unit holders/ shareholders are not tax residents of Cyprus;
  • Applicability of all EU Directives;
  • Wide network of Double Tax Treaties.

Financial and other reporting requirements

The following is a list of the current filing and reporting requirements for all ICIS as determined by the Central Bank:
  • Accounting, preparation of annual Financial Statements, and preparation of annual tax return (IR4).
  • Annual audit
  • Statistical return- must be submitted within 15 working days from the end of each month and quarter
  • Quarterly information return on Net Asset Value at the end of each quarter- must be submitted within 15 days of the end of reporting period.
  • Financial and other reporting requirements (continued)
  • Six monthly balance sheet return every June and December- must be submitted within 15 days of the end of the reporting period
  • Half-yearly report, due each June- must be submitted within two months from the end of the half year period.
  • Quarterly NAV calculation (NAV can be calculated more frequently than quarterly, if desired), and maintenance of all statutory registers
  • Annual report submitted to Central Bank regarding prevention of money laundering and terrorist financing, as prepared by the duly appointed Money Laundering Officer (requirement introduced by Central Bank in 2012).
  • Although no significant changes to the reporting requirements are expected to be announced the above requirements are subject to change upon the discretion of the regulator.

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