Cyprus Private Investment Funds (ICIS) attracting Polish attention
Poland has been added to the list of jurisdictions that are increasingly becoming attracted to the Cyprus Investment Funds. In Poland, a recent change in Polish tax law, which allows EU Funds the same privileges as those enjoyed by Polish domestic investment funds. Polish investment funds are subject to a special Capital Income Tax allowing them full exemption from income tax. As a consequence, the funds covered by the Polish domestic regulations are subject to, but fully exempt from income tax in Poland. As of January 2011, the Capital Income Tax exemption has been extended to funds from the EU, with Cyprus taking the lead in attracting most of Polish interest because of the flexibility that Cyprus offers in addition to the tax advantages.
Cyprus Private Investment Funds, known as private International Collective Investment Schemes (ICIS), are private funds that can be formed under the laws of Cyprus. A private ICIS fund can have up to 100 investors, also known as unit-holders. The purpose of a private ICIS fund is the collective investment of funds injected in such schemes by the unit-holders. It provides an arrangement that enables a number of investors to add collectively their assets, have these professionally managed and invested by independent managers/entities and, in case of successful investment, extract their profits in a tax efficient manner.
Tax Benefits and Advantages of Cyprus Private Funds
ICIS have a plethora of regulatory, tax, commercial and legal advantages, such as the following:
In addition, the following tax advantages are especially significant for an ICIS:
-exemption from tax on profits from sale of shares and other financial instruments;
-exemption from tax on foreign dividends received;
-no withholding on interest and dividend payment made from Cyprus abroad;
-no withholding tax on income repatriation;
-exemption on profits on disposal of securities; and
-a wide network of Double Tax Treaties is in place with more than 40 countries worldwide, securing tax incentives and encouraging the channelling of funds in other countries without or with reduced further taxation.
Types of Private Investment Funds in Cyprus
Under the applicable Cypriot legislation, namely the International Collective Schemes Law 47 (I) 1999 (the ICIS Law), the Central Bank of Cyprus is the regulatory and supervisory authority for ICIS and may, upon a written application, recognise a company, a trust or a partnership as an ICIS. The said forms an ICIS can manifest in are analytically described as follows:
International Fixed Capital Company (IFCC): incorporated under the Companies Law and recognised to operate as an international fixed capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital cannot vary, it remains fixed. The initial minimum capital required to set up an IFCC is US$100,000. If the IFCC is a private ICIS then it is exempted from this capital requirement. A private ICIS is one that has 100 or less investors.
International Variable Capital Company (IVCC): incorporated under the Companies Law and operates as an international variable capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital varies according to the participating investors at any given time. The share capital of the company is equal to the net asset value (NAV) of the shares of the company at any time.
International Unit Trust Scheme (IUTS): an international trust created under the International Trust Law and recognised to operate as an International Unit Trust Scheme under the ICIS Law. (See Cyprus International Trusts). The assets are owned by the Schemes Trust in fiduciary for the trust beneficiaries
International Investment Limited Partnership (IILP): a limited partnership registered under the Partnerships Law and recognised to operate as an international investment limited partnership under the ICIS Law. As with all limited partnerships (see Partnerships), there must be a general partner appointed who manages the fund and is responsible for the assets and liabilities of the fund. The limited partner will also be a member of the scheme. A general partnership can also have companies as partners.
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