Cyprus Funds. Easy, Fast, Affordable

Trading with other peoples money? You have access to money? Don't know how to use them legitimately?

Maybe you have created a great algorithm which is beating the indexes consistently and you want to get funding from investors.

That is great but there is a little or rather a very big problem!

Within EU, you can not trade with other peoples money. It is illegal.

If you are currently investing others people money and you are not licensed, please stop it immediately. If for some reason you are currently tricking your bank providing false information in order to receive money from investors, rest assure that you are misrepresenting your activities to the bank and effectively the ownership of the account which is a criminal offence.

In other words, if you are using others people money in your bank account to trade you are committing a crime.

Within EU, you can not trade with other peoples money. It is illegal.

The Solution

Create a Fund where you can collect investors money legitimately, transparently and start earning your investors the returns you have promised them. Cyprus offers affordable and fast solutions worthwhile for Assets Under Management of more than Euro 5 million (to be worthwhile).

Don't be intimidated by the cost of setting up a fund or running a Fund. Cyprus is no way near the costing of Luxembourg , Holland or the UK when it comes to setting up a fully licensed EU regulated fund.

With appr. Euro 35,000 one-off Set Up costs, Euro 45,000 of Annual Fees and Euro 35,000 Administration Fees you can have your Cyprus Fund Incorporated in less than three months.

With appr. Euro 35k one-off Set Up costs, Euro 45 k Annual Fees & Administration Fees Euro 30k you can have your Cyprus Fund Incorporated in less than three months.

A bit more detail...

There are different types of Cyprus funds to choose from which can meet your budget, strategy but most importantly time-frame! Cyprus has established itself as a destination for both externally as well as internally managed funds which means that there are solutions for any size of fund. In fact, the type of fund will be determined by the specific characteristics of your investments, investors, size, budget, time frame and operations.

Note: We use AUM of Euro 5 million as the minimum benchmark that makes it worthwhile pursuing the establishment of any fund.

I might be interested. What should i do next?

Step by Step Explanation

1. Decide the expected AUM (Assets Under Management) you will be able to collect and use for your fund.
2. The size of the AUM will determine in most cases whether the fund will be externally managed or internally managed. We explain the difference below.
3. The strategy of the fund and the type and size of investors as well as the operational set up the fund will determine the type of fund. We will explain the type of available funds in a separate article.
4. Set Up Process

Once you agree on the type of fund, next thing is to identify a reliable service provider who will assist you with the set up, selection of directors, host providers, premises and any other need your fund type requires to get licensed by the local regulator which is the Cyprus Securities and Exchange Commission (CySEC).

We, CYAUSE Audit Services Ltd can assist you with the set up process. It also also important to identify your internal and external auditors, legal representatives as well as the service provider who will be performing the reporting requirements on behalf of the firm, in the event that this is not performed internally. This is something we can also provide with.

The Elephant in the Room

Why is setting up a Cyprus Fund is Cheaper than other Jurisdictions?

-> Externally Managed Funds vs Internally Managed Funds

Setting up a Cyprus fund comes cheap as Cyprus offers to promoters (persons want to create the fund) the ability to have their fund externally managed; i.e to be hosted (regulatory) under a fully fledged investment firm. This means that office overheads including minimum personnel for compliance purposes are not required resulting in an instant minimum saving of app. Euro 250,000 per annum.

Saving Minimum Euro 250,000 when starting over is a significant incentive for the promoter

Therefore if you choose to have your fund externally managed (under a host) you are left with the following fees to worry about:

1. Set up fees at the beginning of the fund creation

Set up fees are app Euro 35,0000 and can be amortised against the NAV of the fund in the first 12 months (hence these costs are not your costs). These are one-off fees.

2. Annual Fees

Annual fees amount to Euro 45,000 and represent costs to third party providers so as to comply with the EU regulation and provide full transparency to your investors as well as the administration costs which are the costs of reporting monthly, quarterly and annually to the regulators and the fund host. Third parties include 2 non executive directors, audit fees, legal fees, depository fees amongst others.

3. Administration Fees

Administration fees app Euro 25,000 and are in relation to reporting requirements of the local regulator, NAV Calculation and reporting as well as ad hoc compliance / reporting requirements.

4. Performance Fees

Performance fees are variable as they depend from the host and the portfolio manager or risk manager (which could be a third part) as well as the Assets Under Management. Usually they are scaled with minimum annual fees at the class of Euro 50,000 per annum.

Go Ahead and Tease the Water!

1. Start Small - Have your Fund Externally Managed.

2. Become Internally Managed Fund if Cyprus is the right fit for you.

Always depending on the type of fund, you can choose a fund vehicle that can transform from externally managed to internally managed thus giving you the possibility to start small, try Cyprus regulatory and operational environment and then if the existing set up is not suitable for you then you can make your fund internally managed (renting out premises, hiring personnel etc) gaining therefore full control and autonomy. This option would entail your fund to have its own premises in Cyprus, server systems, systems and controls to comply with local regulator (CySEC) minimum organisational set up as well as hiring external advisers for the provision of external audit, internal audit, legal compliance and MiFiD ii requirements.

This is because being internally managed also means that now your fund is directly responsible to the regulator. To mitigate this exposure funds and investment firms outsource core functions such as internal audit, external audit, reporting to CySEC (the admin cost in an internally managed fund) to service providers like CYAUSE Audit Services which would ensure compliance with the latest laws and regulations.

Advantages of Externally Managed Funds

• Cheaper as explained above.
• Not responsible against the regulator; the umbrella host will be responsible. You are responsible against your host who will be performing your due diligence.
• Not responsible for portfolio management or risk management; unless a member of your team is eligible to perform either function by attending CySEC advanced exams.
• Not responsible for Know Your Clients and its reporting against the regulator. Your host will be responsible and in turn it will be scrutinising your KYC procedures etc to mitigate its exposure.

This is because the host of the fund which is usually an AIF is responsible for all of the above and assumes the risk of your actions. In addition, this means that your host will be responsible for the quality of the KYC information, asset management and risk management directly to your investors and to the Cyprus regulator. Since your host assumes this responsibility it will in turn ensure that your fund and procedures comply with the EU regulation which is responsible for and will be reviewing and scrutinising the compliance of your funds with the EU Laws and Regulations.

Each fund type has multiple combinations to meet your needs

Each fund type and solution has multiple combinations that can be provided and which suit different needs such as assets under management, number of investors, type of investors, initial capital requirement and so. All these will be explained in a different article.

Why is Cyprus Attractive for Funds

• Low set up costs: Cyprus Euro 35,000 vs Luxembourg 100,000; rule of thump Cyprus costs 1/3 of the fees.
• Maintenance Costs: Run it on average Cyprus Euro 70,000 vs Luxembourg Euro 150,000 to run it; rule of thump Cyprus costs 1/2 of the fees.
• Law: Common law - Anglo-Saxon, case by case. You know what to expect.
• Legislation - EU legislation vs (Cayman, BVi, etc other jurisdictions - offshore)
• Tax benefits - the majority of funds operate almost tax free as trading of securities are exempt from tax!
• Regulator - less strict than jurisdictions such as Luxembourg, Holland, Ireland.
• Fast - 2- 3 months capability depending on the type of fund
• Cyprus is a European Union Country - Offshore destinations can not be trusted by or used by well informed investors
• Strong Local Calibre - lots of high quality accountants, legal staff who are working hard and are very knowledgeable
• Marketability
• Flexibility - there are types of funds which allow you to use them for any underline principal

...enabling the fund to be 100% Tax Free.

Taxation

Most fund types produce exempt forms of income like trading in securities therefore the only taxable income is interest income which is usually covered by the overhead costs enabling the fund to be 100% tax free.

In addition, Corporation Tax is Only 12.5 %, the is notional interest income on capital introduced, a plethora of double tax treaties with other countries, disposal of securities is tax free, dividends are tax free and many more.

Feel free to send us an mail for further explanation and guidance at [email protected]

CYAUSE Audit Services Ltd

In our capacity as Auditors & Tax Consultants we perform Various Structure Formation which constitutes a large part of our routine day to day work. Whether a High Net Worth Individual or a financial institution we can assist you with the most suitable vehicle to meet your investors needs whether locally or internationally.

Our Global Network of Professionals (tax consultants, lawyers, accountants & auditors) ensures that we have instant access to Corporate Formation Services and Tax Updates across the globe. This enables us not only to create for you a Cyprus Company but any Company in any Jurisdiction so as to best serve your interests.

CYAUSE Audit Services is an Audit & Assurance firm with offices in Nicosia and Limassol. During 2015 we have been awarded by I.C.P.A.C and the A.C.C.A (local and international association of Chartered Certified Accountants) for the Quality of our Audit Services and our Office Procedures.

CYAUSE Audit Services operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience. Covering almost 40 jurisdictions with over 2 000 professionals, we support more than 10 000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 170 000 payslips globally.If you would like us to assist you applying for funding or any other related matter contact us at [email protected] or call us at +357 22 336 321.

Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website or our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.