Whether you are investing in real estate, startups, or financial assets, it is crucial to plan ahead on how to properly structure your investments, minimize taxes, and protect your capital. One of the most effective tools for achieving this is the establishment of an investment fund in Cyprus (CIF – Cyprus Investment Fund).
A fund allows multiple participants to pool their investments, create a transparent asset ownership structure, and simplify capital management. Cyprus, in turn, is one of the most attractive European jurisdictions for fund management, offering a combination of regulatory flexibility, tax benefits, and access to international markets.
Feod Group has been operating in Cyprus since 2007, providing comprehensive legal and investment services. We assist in tax optimization, capital structuring, and the creation of effective investment tools, including investment funds in Cyprus.
In this article, we will cover the key aspects of investment funds in Cyprus, their types, benefits, and the process of establishment.
Investment Funds in Cyprus: Key Facts for Investors
Interest in investment funds in Cyprus is rapidly growing, and the numbers speak for themselves: in 2025, assets under management (AUM) exceeded €11.1 billion. This is clear evidence that Cyprus is becoming one of the leading jurisdictions for international investors.
Cyprus offers a well-developed financial services infrastructure with a large number of professionals in fund management, investment consulting, and compliance. Currently, the market includes 322 asset and collective investment management companies, including 116 licensed management firms, demonstrating the high level of professional support available for investment funds.
Cyprus is particularly attractive for alternative investment funds (AIFs and RAIFs). These funds allow for diverse investment strategies, provide investors with flexible entry conditions, and even enable multiple funds to be managed under a single structure.
Why Choose Cyprus for an Investment Fund?
✔ Full transparency and EU-standard regulation (AIFMD, UCITS V, MiFID II) – Cyprus is not an offshore jurisdiction.
✔ Freedom of choice – no restrictions on investment types and a wide range of fund structures.
✔ Tax benefits – exemption from taxes on dividends, interest, inheritance, and wealth, as well as no capital gains tax on the sale of fund shares.
✔ Low operational costs – compared to other EU financial centers, Cyprus offers more affordable setup and maintenance costs for funds.
✔ International accessibility – English is officially used in business.
By establishing a fund in Cyprus, you gain not just an investment vehicle but a powerful tool for capital protection, tax optimization, and efficient asset management on an international level.
Types of Investment Funds in Cyprus
Cyprus offers various types of investment funds, including Alternative Investment Funds (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS).
- UCITS (Undertakings for Collective Investment in Transferable Securities) are designed for retail investors and operate under strict EU regulations, limiting the types of assets (stocks, bonds, and other financial instruments).
- AIFs (Alternative Investment Funds) offer greater flexibility in investment strategies and asset types, allowing investments in real estate, private equity, hedge funds, venture capital, and other alternative assets.
Types of Alternative Investment Funds in Cyprus:
- RAIF – Registered Alternative Investment Fund – the most flexible structure that does not require CySEC licensing and operates under the management of an already licensed investment firm.
- AIF LNP – Alternative Investment Fund with a Limited Number of Persons – designed for closed groups of up to 50 investors and requires CySEC licensing.
- AIF UNP – Alternative Investment Fund with an Unlimited Number of Persons – suitable for a broad investor base, allowing listing on stock exchanges, and requires CySEC licensing.
Next, we will examine each type of fund in detail, outlining its features and advantages.
1. Registered Alternative Investment Fund (RAIF) – Fast Setup Without a License
RAIF (Registered Alternative Investment Fund) is a simplified form of an alternative investment fund that does not require licensing from the Cyprus Securities and Exchange Commission (CySEC) but must operate under the management of a licensed Alternative Investment Fund Manager (AIFM).
Advantages of RAIF for International Investors
✔ No licensing required – the fund can be launched in just 2-3 months, whereas licensing a traditional fund may take 8-12 months.
✔ No minimum capital requirements – suitable for investors with varying levels of investment.
✔ Flexibility – allows the creation of separate compartments for different asset types, such as real estate, technology, or finance.
✔ Structural benefits – investors can enter and exit the fund without altering the ownership structure.
✔ Asset segregation – legal separation of assets reduces risks.
✔ Investor protection – the fund is managed by licensed professional fund managers.
Requirements for a Registered Alternative Investment Fund (RAIF) in Cyprus
- Shareholder: At least one shareholder (individual or legal entity). Residency of the shareholder is not a factor.
- Director: At least one director (individual or legal entity). Appointing a Cyprus resident director is recommended.
- Secretary: A secretary is mandatory and must be a Cyprus resident (can be an individual or a legal entity).
- Fund Management: A licensed external AIFM (Alternative Investment Fund Manager) must be appointed. The AIFM is fully responsible for fund management, investment strategy, and compliance with EU regulations.
- Depositary: Every RAIF must have a depositary – a bank or investment company responsible for asset custody, ensuring compliance with the investment strategy, and conducting fund operations checks.
- Registered Address: The fund must have a registered legal address in Cyprus.
- Reporting: Mandatory annual audited financial reporting, even if the fund has not conducted any activities. Reports must be submitted to CySEC.
Who Should Choose RAIF?
RAIF is the ideal choice for investors looking for a fast and efficient fund setup in Cyprus while ensuring capital protection. This structure is particularly beneficial for those starting with a small capital base and planning to scale up investments over time.
Due to its flexible structure and lack of strict investment restrictions, RAIF can be used for:
- Real estate funds raising capital for residential, commercial, and hospitality projects.
- Venture capital funds investing in startups and innovative companies.
- Private equity funds focusing on private investments.
When Should You Choose RAIF?
✔️ If you need to attract external investors without complex licensing procedures.
✔️ If you require flexibility for investors to exit without re-registering the company.
✔️ If you want to minimize risks by segregating assets into compartments and outsourcing fund management to a licensed entity.
RAIF is fast to set up, has no investment restrictions, and operates under the supervision of a licensed fund manager.
Fund (RAIF) or Company (LTD): Key Differences
Let’s compare the two using real estate as an example.
One of the main differences between a Registered Alternative Investment Fund (RAIF) and a Limited Liability Company (LTD) is the management structure and control over assets.
In a RAIF, investment management is handled by a licensed fund manager (AIFM). The AIFM is responsible for overseeing the fund, making investment decisions, ensuring regulatory compliance, and reporting to the Cyprus Securities and Exchange Commission (CySEC). Investors hold shares in the fund but do not participate in management—all decisions are made by the professional fund manager, reducing the risk of mismanagement.
In a LTD in Cyprus, shareholders have voting rights and control the company through a Board of Directors, giving them full control over the company’s assets. They decide on buying/selling real estate, dividend distribution, and company strategy. This format is ideal for key investors who want to retain full control, but it is less attractive for external investors since decision-making depends on specific shareholders.
Both RAIF and LTD are viable options for owning real estate, but one may be more advantageous depending on the investor’s goals:
- If you need a simple structure with full control → LTD
- If you want an investment vehicle to attract capital and diversify risks → RAIF
If you have any questions or would like to discuss your specific case, we are here to assist you in choosing the optimal structure for your investment project. Contact us today!
2. Alternative Investment Fund with a Limited Number of Investors (AIF-LNP)
An AIF with a Limited Number of Investors (AIF-LNP) is designed for private investment groups and family offices, as it has a restricted number of participants. It requires licensing by the Cyprus Securities and Exchange Commission (CySEC).
Key Features and Requirements of AIF-LNP in Cyprus:
- Maximum number of investors – 50, considering Look-through provisions (ownership transparency rules). This means that the regulator counts the actual number of beneficiaries, not just the formal number of legal entities or investors. For example, if a fund attracts investments from a company with multiple ultimate beneficiaries, the regulator may count each beneficiary separately. A fund may officially have 30 legal entity investors, but if these entities collectively represent 60 individual beneficiaries, the regulator may determine that the 50-investor limit has been exceeded.
- Asset management limits: Up to €100 million if the fund uses leverage (borrowed capital). Up to €500 million if the fund does not use leverage but applies a 5-year lock-up period (prohibiting withdrawals for at least five years).
- Self-managed structure. The fund can operate without an external fund manager. In this case, it must have a minimum share capital of €50,000.
Who is AIF-LNP Suitable For?
✔ Closed investment groups, such as foreign investors creating a family investment fund.
✔ Investors who want control over the fund without external management.
Who Might AIF-LNP Not Be Suitable For?
- Investors requiring full institutional oversight.
- Some investors may prefer stricter regulatory structures with full oversight mechanisms (e.g., a mandatory depositary and external fund manager), which AIF-LNP does not always require.
3. Alternative Investment Fund with an Unlimited Number of Participants (AIF-UNP)
An Alternative Investment Fund with an Unlimited Number of Participants (AIF-UNP) is a structure that can be offered to a wide audience, making it a popular choice among fund managers seeking large-scale investments.
Key Features of AIF-UNP:
- Mandatory appointment of a depositary: AIF-UNP must appoint a depositary—an independent financial institution responsible for overseeing fund assets.
- Option for internal or external management: The fund can be managed internally (by its own governing bodies) or externally (through an appointed fund manager). If the fund is internally managed, it must have a minimum share capital of €125,000.
- Listing on a stock exchange: The fund can be registered on a stock exchange, making it accessible to a broad range of investors.
Who is AIF-UNP Suitable For?
✔ Funds looking to be publicly traded on a stock exchange.
✔ Investors seeking liquidity, as shares in the fund can be freely bought and sold.
Comparison of Investment Funds in Cyprus
| Criteria | AIF (≤50 Investors) | AIF (Unlimited Investors) | RAIF |
| CySEC License | Yes | Yes | Yes |
| Number of Investors | No more than 50 | Unlimited | Unlimited |
| Umbrella Funds* | Possible | Possible | Possible |
| Minimum Share Capital | €50,000 (if self-managed) | €125,000 (if self-managed) | Not required |
| Management License | No | No | Mandatory |
| Director Qualification Requirements | Yes | Yes | Yes |
| Depositary (where fund assets are held) | EU, Cyprus (exceptions possible) | EU, Cyprus | Cyprus only |
| Annual Reporting to CySEC | Yes, audited report | Yes, audited report | Yes, audited report |
*What are Umbrella Funds? Umbrella funds allow for the creation of multiple investment sub-funds within a single legal structure. Each sub-fund can have its own investment strategy, assets, liabilities, and investors, while all remain under the same legal entity. This is a popular model among investors as each sub-fund can be tailored to different asset types (e.g., stocks, real estate, bonds), geographic markets, or investor groups. Additionally, new investment strategies can be launched within an existing fund without the need to register a new one.
Taxation of Investment Funds in Cyprus
The taxation of Cypriot investment funds follows the same principles as traditional companies, making the jurisdiction highly attractive for tax planning purposes.
Key Taxes for Cyprus Investment Funds (CIF):
- Corporate Tax: Funds are subject to a standard corporate tax rate of 12.5% on net annual profits.
- Capital Gains Tax: Profits from the sale of securities (shares, bonds, debt instruments, investment units, options, and similar financial instruments) are exempt from taxation (0%).
- Capital Gains Tax on Real Estate: Income from the sale of real estate in Cyprus is subject to a 20% capital gains tax on the difference between the sale price and the original purchase price.
- Dividend Tax: 0% for tax residents with Non-Dom status.
- Additional Benefits: No wealth tax, inheritance tax, or gift tax (0%).
Learn More: Cyprus Tax System Overview
This tax structure allows investment funds in Cyprus to effectively optimize tax planning, minimizing unnecessary tax costs both at the corporate level and for individual investors.
Process of Registering an Investment Fund in Cyprus
Registering an investment fund in Cyprus is a multi-step process that requires careful planning, legal preparation, and interaction with the regulator. Choosing the right type of fund and structuring it properly can significantly impact the speed of registration and overall operational efficiency.
Key Steps in Registering an Investment Fund in Cyprus:
- Structuring and Planning
The appropriate fund structure (AIF or RAIF) is determined based on its investment objectives and target audience. Key service providers, including the fund manager, depositary, and auditor, are appointed to ensure proper fund operations. - Preparation of Legal Documents
The legal documentation required for fund registration in Cyprus includes: Articles of association, Agreement with the fund administrator, Appointment documents for directors and fund managers, Legal structure documentation, Risk management framework, Asset valuation procedures, etc. - Submission of Documents to CySEC
The completed application package is submitted to the Cyprus Securities and Exchange Commission (CySEC) for review. In the case of a RAIF, registration is handled through the appointed AIFM (Alternative Investment Fund Manager), and direct approval from CySEC is not required. - Approval and Registration
CySEC reviews and approves fund registration applications. Once approved, the fund is officially entered into the registry of investment funds and assigned a registration number. - Operational Launch
The final stage involves the practical launch of the investment fund and the commencement of its activities. A marketing campaign is initiated to attract capital, and the first investment transactions take place. Additionally, the fund must comply with regulatory requirements, including regular reporting to CySEC and conducting annual audits.
Legal Support for Fund Registration in Cyprus
Since 2007, Feod Group has been providing comprehensive services related to setting up companies, funds, and trusts in Cyprus. Our office, located in Larnaca, offers full legal support for businesses in Cyprus, including:
✔ Consultations on fund structure selection (AIF, RAIF, UCITS)
✔ Preparation of all necessary legal documents
✔ Interaction with the regulator (CySEC) and application submission support
✔ Tax optimization consultations and compliance requirements
✔ Assistance with the operational launch of the fund
Contact us to learn more about the registration process, tax benefits, and investment opportunities in Cyprus!
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FAQ
Cyprus offers transparent EU-standard regulation, tax incentives (exemption from taxes on dividends, interest, and capital gains), flexibility in fund structuring, low operational costs, and international accessibility.
Yes, non-residents of Cyprus can invest in an AIF without restrictions. Cypriot Alternative Investment Funds (AIFs) are designed to attract international investors, and their regulation complies with EU standards.
RAIF (Registered Alternative Investment Fund) does not require CySEC licensing, which reduces the time needed for launch. It also does not require minimum capital and offers flexibility in asset management.
- Determine the fund structure (AIF or RAIF).
- Prepare legal documents.
- Submit an application to CySEC (for AIF) or register through an AIFM (for RAIF).
- Obtain approval and official registration.
- Operational launch and regulatory compliance.
- RAIF – 2-3 months.
- AIF – 8-12 months due to the licensing process with CySEC.
Yes, by choosing RAIF (Registered Alternative Investment Fund). This fund does not require CySEC licensing but must be managed by a licensed AIFM (Alternative Investment Fund Manager).
Contact us
For enquiries please fill in the form below. Our consultants will contact you with the details.
Griva Digeni 49, Chrystalla Court 1st Floor Office 11, 6036 Larnaca, Cyprus
11B Lyuteranska St., off. 23, 01024
