Cyprus Government Introduces Mutual Funds
The Cyprus Government
has announced that it will soon introduce legislation to allow
mutual funds on the island. The introduction of mutual funds is
expected to help develop local capital markets by enabling investors
to spread and lower risk through diversified investment funds. Under the draft legislation
currently before the Council of Ministers, mutual funds will need
a minimum start-up capital of CYŁ1m and a separate Mutual Funds
Management Company with a minimum capital of CYŁ450,000 which
will be legally responsible to fund members. Mutual Funds will be restricted
to offshore borrowing for investment purposes. The regulations
will also allow 'open-ended investment companies' and will permit
banking institutions and other legal entities to provide custodian
services for mutual funds. To encourage the growth of mutual
funds the government has put together an attractive tax package.
Mutual funds will only charge 50% of the normal income tax on
fund profits and will receive special exemptions from withholding
tax and dividends paid to similar firms. It is expected that mutual
fund members (investors) will also be exempt from all taxation
on income earned from mutual funds. .
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