Foundations and trusts in Cyprus

Cyprus Alternative Investment Funds (AIF) and Collective Investment Enterprises in Transferable Securities (UCITs)

The sole purpose of AIF and UCITs is to jointly invest the funds of their Investors / Shareholders in the interests of these Investors. It is possible to register two (2) types of AIF in Cyprus:

• Alternative Investment Funds Limited (75) (AIFLNP)
• Alternative Investment Funds with unlimited persons (AIF)

Cyprus Alternative Investment Funds may be of limited or unlimited duration and may take various legal forms depending on structural orientations and tax considerations. Below are the different legal forms in which an AIF can be formed: AIF with a limited number of investors:

• Variable Capital Investment Company (VCIC)
• Fixed Capital Investment Company (FCIC)
• Limited partnership (LP)

AIF with an unlimited number of investors:

• Variable Capital Investment Company (VCIC)
• Fixed Capital Investment Company (FCIC)
• Limited partnership (LP)
• General Fund (CF)

UCITs can take the following legal forms:

• General fund
• Company with variable capital

AIF and UCIT are taxable or non-taxable depending on their legal status. Under certain conditions, the management and administration fees charged for AIFs and UCITs may be exempt from VAT.

Trusts in Cyprus

A trust can be defined as an obligation of a person (i.e. trustee) to whom property is transferred by the owner of the property and the creator of the trust (i.e. settlor) to hold and manage such property for a specified period in accordance with the oral or written wishes of the settlor, expressed in Trust Deed or Will, in favor of a specified person or persons, or class of persons (i.e. beneficiaries). The trust is not a separate legal entity.

International trusts

The law defines an international trust as a trust in respect of which:

• The settlor is not tax resident in Cyprus during the calendar year preceding the year in which the trust was created;
• At least one of the trustees is tax resident in Cyprus during the period of the trust;
• None of the Beneficiaries is tax resident in Cyprus during the calendar year preceding the year in which the trust was created.

In accordance with Cypriot law:

1. If the beneficiary is a resident of Cyprus, Cyprus will levy every form of taxation on the income and profits of the Cyprus International Trust, which are earned or considered to be earned both from sources in Cyprus and outside of it.
2. If the beneficiary is not a resident of Cyprus, Cyprus will levy each form of taxation only on income and profits of a Cyprus International Trust that are earned or deemed to be earned from sources in Cyprus.