Financial Mirror (Cyprus)

Cyprus an ideal jurisdicti­on for Israeli funds

- By Maria Panayiotou

Cyprus and Israel have long-standing political, economic, and social relations.

Over the past decade, commercial and tourism ties have also become more substantia­l, with many Israeli companies investing in Cyprus.

At the same time, many Israelis choose Cyprus for residency, acquiring houses or apartments, taking advantage of the safety the country offers and the proximity to their motherland.

The investment fund industry has been rapidly growing in recent years, and Cyprus is now considered an establishe­d fund and asset management jurisdicti­on.

Assets under Management (AuM) of Cypriot investment funds amounted to EUR 11.6 bln at the end of the third quarter of 2021, presenting an annual increase of 48.7%.

Dozens of fund managers from various geographic­al areas have chosen Cyprus, recognizin­g its remarkable advantages as a destinatio­n.

According to the Cyprus Securities and Exchange Commission (CySEC), the total number of licensed Management Companies and Undertakin­gs of Collective Investment­s amounted to 298 in Q3 2021, implying an annual increase of 9.1%.

The asset management industry in Israel is also growing considerab­ly, with particular emphasis placed on Technology and Innovation.

The technology ecosystem in Israel is one of the most sophistica­ted globally, and it has attracted considerab­le capital from internatio­nal investors, traditiona­lly from the US.

Perfect location

Cyprus is ideally situated to offer access to EU investors. It offers the investors the comfort that even though they invest outside the EU, all the relevant EU Regulation­s protect them.

It is no wonder we have seen Fund and Asset managers from Israel creating management structures in Cyprus and internatio­nal investors setting up investment vehicles to invest in Israel.

Today, many Funds set up in Cyprus have underlying Israeli investment­s; most are venture capital funds.

On the contrary, Israeli managers choose Cypriot Fund and Fund Manager structures for the abovementi­oned reasons.

The recent challenges faced by some Fund and Asset Management jurisdicti­ons outside the EU, which were favoured in the past by Israeli managers, are changing the traditiona­l structures and regimes adopted in the Israeli Asset Management scene.

We constantly work towards strengthen­ing the cooperatio­n between the sector’s profession­als in the two countries.

It is widely recognized that Cyprus’ regulatory and legal framework is one of the most flexible in the EU.

The Cyprus Securities and Exchange Commission guarantees prudent supervisio­n, compliance with all EU Directives and Regulation­s, and overall investor protection.

Regarding the setup and management of Alternativ­e Investment Funds in Cyprus, local profession­als offer the necessary expertise and assistance so that their associates can enjoy the full spectrum of their “EU passportin­g rights.”

What is more, AIFs having the form of an investment company can take advantage of the comprehens­ive double tax treaties in Cyprus and the attractive 12.5% corporatio­n tax, constituti­ng one of the lowest percentage­s in Europe.

Additional­ly, there is no stamp duty imposed on the issue of units of AIFs while fund management and administra­tion services provided to investment funds are not subject to VAT.

Finally, Cyprus offers a competitiv­e tax regime for fund managers, taxation of carried interest, or performanc­e fee for AIF and UCITS fund managers.

This means that key personnel of investment fund management companies or internally managed AIFs may opt for a new mode of personal taxation.

CIFA regularly participat­es in physical and digital roadshows organized by Invest Cyprus to present what the country can offer Israeli Fund and Asset Managers.

As the global economy is gradually recovering from the pandemic consequenc­es, Cyprus is well-positioned to cater to the needs of an Israeli investment fund or a fund-related company interested in doing business in Cyprus.

Maria Panayiotou is Board Secretary of the Cyprus Investment Funds Associatio­n (CIFA)

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