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Exploring Life in a Residential Complex: Essential Insights for Property Owners

Cyprus is a very attractive destination for foreign investors for a number of reasons. The warm weather, the island's strategic location between 3 continents, a stable economy and the recent discovery of natural gas are just a few of the reasons which render the island an excellent location for investment. Cyprus has been a member of the European Union since 2004 and a growing economy creates an ideal climate for investments.

Moreover, the government has implemented new legislation which allows non EU citizens to obtain permanent residence in Cyprus under certain conditions, when buying a property here worth a minimum of €300.000. The process of obtaining the permanent residence has recently been simplified by the government and it is now easier and faster to obtain the Permanent Residence Permit. This new law has already attracted large numbers of Chinese and other non EU nationals who wish to live in Cyprus.

Let us optimize your investment portfolios and enhance their value. With a profound understanding of Cyprus laws and expertise in accounting, taxation, and business strategies, we tailor solutions to maximize returns and manage assets effectively. Trust us for personalized asset management and investment advice.

Cyprus International Business Company (IBC)

A Cyprus International Business Company (IBC) serves as a cornerstone in effective tax planning strategies. Anchored in Cyprus legislation, which extends preferential tax terms to non-resident companies, an IBC provides the flexibility to either maintain residency within Cyprus, subject to local management and control, or operate as a non-resident entity with management and control outside Cyprus.

Distinctive Features of Cyprus IBC:

  • Tax Treaties and Double Taxation Avoidance:

    The establishment of an IBC by non-residents relies on the existence of double taxation avoidance treaties between Cyprus and the jurisdictions where the company or its subsidiaries operate. With Cyprus boasting over 30 such treaties, international tax planning becomes effective by leveraging low corporate tax rates and treaty benefits.

  • Legal Entity and Corporate Legislation:

    Recognized internationally as an independent legal entity, an IBC operates under the legal framework of its registration country. In Cyprus, the principal corporate legislation governing companies mirrors the UK Companies Act of 1948, providing a robust legal foundation for business operations.

Corporate Governance:

  • Directorship:

    An IBC requires at least one director, who can be either an individual or a legal entity. Similarly, the same requirement extends to shareholders, with director nationality being crucial while shareholder nationality remains inconsequential. Our firm often appoints nominee directors to ensure management and control occur in Cyprus for tax purposes.

  • Secretary:

    Mandated by law, the appointment of a secretary is essential, with residency in Cyprus recommended for seamless administration.

  • Nominee Shareholders:

     Typically Cypriot nominees, nominee shareholders represent the interests of the beneficial owner. By holding shares on trust, confidentiality is maintained, with nominee shareholders acting on behalf of the beneficial owner while upholding a high level of privacy.

Registration Process of an International Business Company:

  • Name Approval:

    The journey commences with selecting a company name and submitting it to the Registrar of Companies. While approval typically takes five business days, expedited options are available through our law firm.

  • Memorandum and Articles of Association:

    Following name approval, the company's Memorandum and Articles of Association are meticulously prepared and submitted for registration, accompanied by officer and shareholder information.

  • Share Capital and Incorporation:

    Establishing the company's share capital, which can be expressed in any currency without a minimum requirement, marks a pivotal step. Incorporation usually concludes within approximately seven working days, culminating in the issuance of corporate documents.

Additional Services and Facilities:

  • Registered Office:

     Compliance with Cyprus Company Law necessitates the presence of the registered office within Cyprus.

  • Confidentiality:

    Beneficial owner information is treated with utmost confidentiality, safeguarded by the appointment of nominee directors, shareholders, and secretary. Disclosure to governmental institutions is restricted, with beneficiary details required only for bank account opening, where discretion is maintained.

  • Virtual Office:

    Virtual office services streamline mail receipt and forwarding, along with fax and phone message management, enhancing operational efficiency.

  • Bank Account:

    Cyprus IBCs can maintain multiple bank accounts in any currency with Cyprus banks, offering internet banking and debit/credit card facilities. Account opening is swift, typically on the same day, subject to requisite documentation.

In essence, a Cyprus International Business Company presents a robust platform for international business endeavors, supported by favorable tax regimes, legal structures, and administrative services, ensuring efficiency, confidentiality, and compliance.

OPEN-ENDED INVESTMENT FOR COLLECTIVE INVESTMENTS IN TRANSFERABLE SECURITIES (UCITS)

The UCITS Law 200(I)/2004, which implements EU directives, provides the legal framework for registering, regulating, and marketing local and foreign funds in Cyprus.

Under this law, a UCITS is an undertaking whose sole objective is to collectively invest publicly collected capital in transferable securities and money market instruments via stock markets, banking deposits, and other investments. Its operation is based on risk-spreading principles, and its units can be redeemed directly or indirectly upon the unit holder’s request using the undertaking’s assets.

To establish a UCITS, permission from the Cyprus Exchange and Securities Commission (CySEC) is required.

Conclusion:

Owning property in a residential complex with communal areas entails embracing shared responsibilities, adhering to legal obligations, and actively participating in community management. By familiarizing themselves with the nuances of communal living, property owners can contribute to a flourishing community while ensuring compliance with regulatory frameworks. Additionally, maintaining third-party liability insurance is imperative to protect the collective interests of all residents, fostering a secure and harmonious living environment.

The law clarifies that the following are not considered UCITS:

  • Closed-ended UCITS.
  • UCITS that raise capital without promoting their units to the public in Cyprus or any other EU member state.
  • UCITS that, based on their fund rules or Memorandum and Articles, only sell their units to the public of third countries.
  • UCITS which conflict with the investment and borrowing policy set out in Law 200(I)/2004.
  • Investment companies whose assets are invested through subsidiary companies other than in transferable securities.

SETTING UP AND OPERATING A MUTUAL FUND IN CYPRUS

To set up and operate a mutual fund in Cyprus, permission from CySEC is required. Once the application is submitted, CySEC will communicate its decision within 6 months. The management Company is entitled to issue or redeem fund units through representatives who may only be Banks, Investment Firms, and co-operative credit institutions.

The application must meet specific criteria:

  • Fund regulations need approval from CySEC.
  • The name and prospectuses of the fund require approval from CySEC.
  • The minimum initial asset value of the fund must be at least EURO 1,700,000.00 (Euro One Million and Seven Hundred Thousand), deposited within three months of the license being granted.
  • The minimum share capital of the Management Company must be at least EURO 765,000.00 (Euro Seven Hundred and Sixty Five Thousand) to be paid in full with the granting of the operation license.
  • The Management Company must have shareholders with the know-how, duly organized and staffed, and with the technical infrastructure and financial means to operate.

SETTING UP AND OPERATING A VARIABLE CAPITAL INVESTMENT COMPANY IN CYPRUS

To establish and operate a Variable Capital Investment Company, permission from CySEC is required. A Variable Capital Investment Company can only manage its assets and cannot undertake the management of third-party assets.

The application must meet criteria similar to those required for a Mutual Fund, and in addition:

  • The Investment Company must have a minimum fully paid share capital of EURO 1,700,000.00 (Euro One Million and Seven Hundred Thousand).
  • The administration of the Investment Company must be assigned to a Management Company unless CySEC grants an exemption.
  • Special rules for the Memorandum and Articles of the Investment Company must be approved by CySEC.
  • Custody of the assets is normally assigned to an approved custodian.

CROSS-BORDER PROVISION OF SERVICES

A UCITS that has received an operation license from another Member State which adopts the EU Directive 85/611/EEC may be established and carry on its activities in Cyprus. The CySEC requires that a notification is given to CySEC by the home Member State’s authorities including all relevant information concerning the fund including its regulations.

Additionally, a UCITS established and licensed in a third country or a UCITS not applying the EU Directive 85/611/EEC that wishes to market its units of shares in Cyprus is subject to prior authorization by CySEC. However, these types of UCITS may sell their units in Cyprus, but not market without being approved by CySEC, provided that the sale is realized only by legal entities acting as representatives in Cyprus already approved by CySEC.

TAXATION OF LOCAL UCITS IN CYPRUS

UCITS are subject to tax like any other entity. Generally, UCITS are exempt from taxation on dividend income and are also exempt from tax on the profit from the disposal of securities. Additionally, there are no withholding taxes when dividends are paid by UCITS to non-Cypriot resident recipients.

ALTERNATIVE INVESTMENTS FUNDS LAW (2014)

Cyprus implemented the Alternative Investment Funds Law of 2014 (the “AIF Law”) in mid-July 2014. The AIF Law replaces and repeals the International Collective Investment Schemes Law (the “ICIS Law”), which governed international investment funds since 1999 in Cyprus.

The AIF Law adopts relevant European Union Directives on asset management and protection, updating the funds regime in Cyprus to focus on transparency and investor protection. The relevant rules for the authorization, operating conditions, transparency requirements, and management of AIFs, as well as the roles of their directors, custodians, and managers, are now standardized under the AIF Law.

OUR SERVICES

Our law firm can assist in the creation of local or foreign UCITS and can prepare and submit the application to CySEC along with providing support and ongoing regulatory reporting of UCITS in Cyprus.

Additionally, our law firm can undertake the creation of an AIF by assisting with the setting up, registration, and licensing of an AIF by preparing and submitting the application to the Cyprus Securities and Exchange Commission.

Disclaimer: These articles are provided for informational purposes only and does not constitute legal advice. Readers are advised to consult with legal professionals for advice specific to their individual circumstances.