Setting Up a Cyprus Investment Fund in 2026: RAIF and AIF Explained

Cyprus has become one of the EU's faster-growing fund domiciles, and the reason most managers cite is the Registered Alternative Investment Fund: a vehicle you can bring to market in weeks rather than months because CySEC registers it instead of authorising it. The catch — and the point most promoters underplay — is that the speed is borrowed from an authorised manager. This guide sets out how the RAIF and the authorised AIF actually differ in 2026, the legal structures available, who may invest, the capital you need, how AIFMD II lands in Cyprus, and how the fund and its investors are taxed.The Alternative Investment Funds Law, N.124(I)/2018

What is a RAIF and how fast can it launch?

A RAIF is an alternative investment fund that is entered in CySEC's public register rather than individually authorised by it. There is no fund-level pre-authorisation, so registration typically completes in about four to six weeks — against six months or more for an authorised AIF — provided a duly authorised external AIFM files a complete notification.

The regulatory logic is straightforward: CySEC has already vetted the AIFM, so it does not re-vet the fund. Once the AIFM submits the notification pack, CySEC has a short statutory window to enter the RAIF in the register, and the fund can begin operating from the date of registration. A RAIF can be open- or closed-ended, can be established as an umbrella with multiple segregated compartments each running a different strategy, and must raise at least €500,000 of assets under management within its first 12 months.AIF Law N.124(I)/2018, Part VIII (RAIFs); CySEC RAIF register

The defining condition is management. A RAIF cannot be self-managed; it must appoint an external, full-scope AIFM authorised either by CySEC or another EU national competent authority. A narrow exception permits a closed-ended limited partnership investing at least 70% in illiquid assets to be run by a sub-threshold (mini) AIFM, an EU UCITS management company or an EU MiFID investment firm.

RAIF vs authorised AIF: which do you need?

Choose a RAIF for speed and lower fixed regulatory overhead when you already have — or will hire — an authorised AIFM and your investors are professional or well-informed. Choose an authorised AIF when you want to market to retail investors, need a self-managed structure, or the strategy sits outside what a RAIF permits.

Cyprus offers three principal AIF categories. The authorised AIF with an unlimited number of persons (AIFUNP) can, subject to conditions, be marketed to retail as well as professional and well-informed investors, and may be self-managed. The authorised AIF with a limited number of persons (AIFLNP) is capped at 50 investors and open only to professional and well-informed investors. The RAIFhas no statutory investor cap but is likewise restricted to professional and well-informed investors and must be externally managed. Because the RAIF leans entirely on the AIFM's licence, it is usually the quickest and cheapest to launch where an AIFM is already in place; the authorised routes cost more time and money but unlock retail distribution and self-management.AIF Law N.124(I)/2018, Parts II–VIII

What legal structures can the fund take?

A Cyprus AIF or RAIF can be established as a variable capital investment company (VCIC), a fixed capital investment company (FCIC), a limited partnership, or a common (contractual) fund. The VCIC is the workhorse for most equity and multi-strategy funds; the limited partnership dominates private equity, venture and real assets.

The variable capital investment company issues and redeems shares at net asset value, which suits open-ended strategies and maps naturally onto compartmentalised umbrellas. The limited partnership, with a general partner and limited partners, mirrors the closed-ended draw-down model international private-equity and venture investors expect. The common fundis a purely contractual pool of assets with no separate legal personality, managed by the AIFM on behalf of unitholders. Whichever the fund itself uses, the AIFM and the general partner are typically Cyprus limited companies — see the company registration guide for that underlying vehicle. Each compartment of an umbrella is ring-fenced, so the assets and liabilities of one compartment cannot be used to satisfy the claims of another.

Who can invest and how much capital do you need?

RAIFs and AIFLNPs admit only professional and well-informed investors; only the authorised AIFUNP can take retail money. Minimum capital depends on the structure: externally managed funds have no prescribed share capital, but a self-managed AIFUNP needs €300,000 and a self-managed AIFLNP €50,000.

A professional investor meets the MiFID II professional-client test. A well-informed investor does not, but either confirms in writing an awareness of the risks and commits at least €125,000, or is assessed as well-informed by a bank, MiFID investment firm or UCITS management company. The distinction matters because it, not the vehicle name, drives which categories of fund a given investor base can access.AIF Law N.124(I)/2018 (definitions of professional and well-informed investor)

Do you need an AIFM, and what does it cost?

A RAIF always needs an external authorised AIFM. Authorised AIFs may instead be self-managed. A full-scope external AIFM must hold €125,000 of initial own funds (€300,000 for an internally managed fund), with additional own funds once assets under management exceed €250 million; a sub-threshold mini-AIFM needs €50,000.

The threshold that separates a full-scope AIFM from a mini-AIFM is asset size: managers stay sub-threshold if the portfolios they manage are below €100 million, or below €500 millionfor closed-ended unleveraged funds whose units are locked up for at least five years. Above those lines the manager needs full AIFM authorisation. In practice many first-time promoters do not set up their own AIFM at all: they appoint a third-party (host) AIFM already licensed in Cyprus, which supplies risk management, portfolio management, compliance and regulatory reporting for a fee, letting the fund launch as a RAIF within weeks. Building your own AIFM only pays off at scale or where you run several funds.The Alternative Investment Fund Managers Law, N.56(I)/2013

How does AIFMD II change Cyprus funds in 2026?

AIFMD II (Directive (EU) 2024/927) had an EU transposition deadline of 16 April 2026. Cyprus had not completed full transposition by that date; bills amending the AIFM Law and the UCITS Law are progressing, and CySEC has been implementing key measures in advance through circulars.

The directive tightens rules on delegation of portfolio and risk management, standardises liquidity-management tools for open-ended funds, expands supervisory reporting, refines depositary and custody requirements, and creates a harmonised framework for loan-originating funds. Ahead of formal transposition, CySEC has already required AIFMs of open-ended AIFs and UCITS management companies to select at least two of the harmonised liquidity-management tools and to seek approval for the corresponding fund-document amendments.Directive (EU) 2024/927 (AIFMD II)CySEC Circular C743 (19 December 2025)

For a manager setting up in 2026 the practical implication is to build these expectations into the fund documents from day one — particularly liquidity tools and any loan-origination limits — rather than retrofit them once the amending laws are gazetted. Because this is a moving legislative target, any specific numerical limit under the transposing law should be confirmed against the final Cyprus text when it is enacted.

How are Cyprus funds taxed in 2026?

A fund set up as a company falls within the 15% corporate income tax that applies from 1 January 2026, but the exemption for gains on disposals of securities and the participation exemption on dividends often cut the effective rate sharply. Each compartment of an umbrella is treated as a separate taxpayer, and non-resident investors are generally untaxed in Cyprus on redemptions.

Several long-standing features make the base attractive. Profits from trading in securities (shares, bonds, units and similar titles) are exempt from corporate tax; dividends received are generally exempt; there is no Cyprus withholding tax on dividends, interest or redemption proceeds paid to non-resident investors; and Cyprus levies no subscription tax on fund assets. Investors who are Cyprus tax resident but non-domiciled also benefit from the SDC exemptions covered in our corporate tax guide. The corporate rate rose to 15% from 12.5% under the 2026 reform, aligning Cyprus with the OECD Pillar Two minimum, so the headline figure changed even though the fund-specific exemptions did not.Income Tax Law N.118(I)/2002 (15% corporate rate from 1 Jan 2026); securities exemption, Art. 8(22)

Because tax outcomes turn on the exact structure, investor residency and strategy, treat the above as the framework rather than advice on a particular fund; the securities exemption in particular depends on the instruments actually held.

What is the setup process and timeline?

For a RAIF, expect roughly four to six weeks from a complete file to CySEC registration; for an authorised AIF, several months. The critical path is almost always the AIFM arrangement and the service- provider appointments, not the CySEC step itself.

1. Fix the structure. Decide RAIF vs authorised AIF, legal form (VCIC, limited partnership, common fund), single fund vs umbrella, and open- vs closed-ended.
2. Arrange the AIFM. Appoint an existing third-party full-scope AIFM (fastest) or, at scale, license your own under the AIFM Law.
3. Appoint service providers.Depositary, external auditor, administrator and legal counsel — regulated funds must be audited annually, as set out in our Cyprus audit requirements guide.
4. Draft the offering documents. Prospectus/offering memorandum, constitutional documents and (from 2026) AIFMD II-aligned liquidity and delegation provisions.
5. File with CySEC. The AIFM submits the RAIF notification for registration, or the full authorisation application for an AIF.
6. Launch and raise. Begin operating; a RAIF must reach €500,000 of AUM within 12 months.