Why Choose Cyprus as a Fund Jurisdiction: A Fund Manager’s Perspective

The choice of fund jurisdiction plays a critical role in the success and operational efficiency of any investment vehicle, especially given the increasing competitiveness and regulatory complexity of today’s financial landscape. As fund managers and promoters seek jurisdictions that offer regulatory stability, ease of market access, operational efficiency, and competitive costs, Cyprus is rapidly emerging as a leading destination of choice in the European Union. With its robust legal framework, innovative fund structures, EU harmonisation, and strategic geographic location, Cyprus offers an ideal ecosystem for launching and managing funds.

1. Regulatory Excellence Within the EU Framework

Cyprus, as a full member of the EU, aligns its legal and regulatory framework with all relevant EU directives, particularly the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. This compliance offers Cyprus-based fund managers access to EU passporting rights, allowing seamless cross-border distribution of funds across the European Economic Area (EEA). This feature alone gives fund promoters a significant commercial advantage.

Importantly, the country’s competent regulatory authority, the Cyprus Securities and Exchange Commission (CySEC), has developed a strong reputation for being accessible, pragmatic, and investor-focused. Its responsiveness and close cooperation with industry stakeholders, including the Cyprus Investment Funds Association (CIFA), creates a dynamic and evolving fund environment that adapts to market trends without sacrificing investor protection.

This regulatory maturity has been further reinforced by the government's commitment to continuously update legislation and align with best practices recommended by ESMA, IOSCO, and FATF. As such, Cyprus offers both the credibility of an EU jurisdiction and the agility of a business-friendly environment.

2. Innovative and Flexible Fund Structures

One of the most attractive features for fund managers and promoters in Cyprus is the diverse and flexible range of fund vehicles available. The legislation accommodates a broad array of structures to suit varying investor profiles, asset classes, and strategies.

Cyprus offers three main types of regulated investment funds:

• UCITS, ideal for retail investors and highly liquid strategies;
• Alternative Investment Funds (AIFs), suited for professional and well-informed investors; and
• Registered Alternative Investment Funds (RAIFs), which do not require direct authorisation from CySEC but must be managed by a licensed AIFM.

The RAIF model, introduced in 2018, has proven especially attractive. With its reduced time-to-market, cost efficiency, and operational flexibility, RAIFs allow fund promoters to swiftly respond to investor interest or market opportunity. This innovation has put Cyprus on the radar of fund initiators who prioritize agility and speed without compromising on quality or governance.

In addition, funds can be structured as open-ended or closed-ended vehicles, set up as common funds, investment companies, or limited partnerships. This modularity in structuring makes Cyprus particularly appealing to private equity, real estate, infrastructure, hedge fund, and even ESG-focused strategies.

3. Competitive Cost Structure and Skilled Workforce

Unlike some of its more expensive peers like Luxembourg or Ireland, Cyprus offers a cost-effective alternative while maintaining high-quality legal, regulatory, and operational standards. Fund setup, licensing, and ongoing administration costs are significantly lower. This value-for-money proposition is particularly attractive to boutique managers, emerging managers, and first-time fund promoters.

Moreover, Cyprus boasts a well-developed professional services ecosystem. The island is home to numerous experienced fund administrators, lawyers, tax advisors, and auditors, all of whom are well-versed in fund regulations and international standards. English is the working language of business and law, and most service providers are trained in the UK or other Commonwealth jurisdictions, ensuring cultural and professional alignment with international investors.

As a result, fund managers benefit from:

• Fast turnaround times
• Local expertise with global experience
• A one-stop-shop for fund servicing
  
  

4. Strategic Geographic Position and Global Connectivity

Cyprus’s geographic location at the crossroads of Europe, Asia, and Africa makes it a natural gateway for investment flows into and out of these regions. This is particularly relevant for fund managers targeting:

• Emerging markets in the Middle East and North Africa (MENA)
• Private capital flows from the Gulf Cooperation Council (GCC) region
• Family offices and institutional investors in Eastern Europe and Central Asia

The country also maintains strong bilateral relationships and double tax treaties with over 65 countries, including India, China, Egypt, the UAE, the UK, and the US. These treaties help reduce withholding taxes and create tax-efficient fund structures, especially in cases involving cross-border investments.

Furthermore, Cyprus is well-connected via direct flights to major financial centers and operates in a time zone that overlaps with both Asian and European markets.

5. Tax Efficiency and Transparency

Cyprus offers a competitive and transparent tax regime tailored to the needs of international fund managers and institutional investors:

• No withholding tax on dividends or interest paid to non-residents
• No capital gains tax (except on gains derived from real estate located in Cyprus)
• Corporate tax rate of 12.5%, among the lowest in the EU
• Possibility to benefit from Notional Interest Deduction (NID) on new equity
• No stamp duty on subscription, redemption, or transfer of fund units

Cyprus is also fully compliant with OECD, FATF, and EU tax transparency standards, including the implementation of DAC6, CRS, and BEPS recommendations. This balance of tax efficiency and regulatory compliance gives fund promoters confidence when marketing funds to institutional clients.

6. Investor Protection and Legal Certainty

Cyprus operates under a common law legal system, inherited from the British legal tradition. This provides legal certainty and predictability for investors and fund sponsors accustomed to English law. The court system and arbitration frameworks are mature, impartial, and aligned with international investor expectations.

In addition to CySEC’s regulatory oversight, investors in Cyprus-based funds benefit from strong governance standards, including:

• Clear NAV calculation rules
• Mandatory depositary oversight for certain fund types
• Regular financial reporting and disclosures
• Strict anti-money laundering (AML) compliance protocols

This high degree of transparency and investor protection fosters trust and long-term capital formation.

7. A Growing and Dynamic Funds Ecosystem

Cyprus's investment funds industry is one of the fastest growing in Europe. According to CIFA, the total assets under management (AUM) of Cyprus-based funds has seen double-digit growth year over year. The government, regulators, and private sector are aligned in their vision to make Cyprus a leading international fund jurisdiction.

The country’s ecosystem is further supported by:

• Ongoing investment in digital transformation and fintech infrastructure
• Initiatives to attract sustainable and ESG investments
• Government programs to promote Cyprus as a regional financial hub

Regular events, conferences, and partnerships with global associations such as EFAMA and ALFI also enhance the island’s visibility and integration into the global fund community.

Conclusion

For fund managers and promoters looking for a jurisdiction that blends EU credibility, regulatory agility, cost efficiency, and strategic market access, Cyprus delivers a compelling proposition. Whether you are launching a private equity RAIF, a hedge fund targeting MENA, or a UCITS vehicle for EU retail investors, Cyprus offers the flexibility, infrastructure, and support network needed to succeed.

As the global fund industry evolves, driven by investor demand for transparency, agility, and innovation, Cyprus stands out not merely as an alternative, but as a strategic first choice.

Contact Us

This publication should be used as a source of general information only. It is not intended to give a definitive statement of the law. For a FREE Initial Consultation to discuss the specifics of your enquiry please contact Andreas Athinodorou on + 357 22 057 570 / +357 22 057 560 or andreas.athinodorou@atgfunds.com / andreas.athinodorou@atgcorporate.com.