In 2021, India’s Ministry of Finance issued an order advising that Cyprus has been classified as a ‘Category I’ country, being an approved jurisdiction where funds based/regulated in Cyprus can be used for the purposes of investing into Indian securities. Cyprus is the only European Union state to be granted such status as of now.
The Category I FPI includes entities from Financial Action Task Force (FATF) member countries or from any country specified by the Indian government by an order or by way of an agreement or treaty that are:
- Appropriately regulated funds.
- Unregulated funds whose investment manager is appropriately regulated and registered as a Category I FPI.
- University-related endowments of such universities that have been in existence for more than five years.
Although Cyprus is not directly a FATF member, following this Governmental approval, Cyprus-based funds are now eligible to be registered as Foreign Portfolio Investors (FPIs), providing an investment route to Indian securities to non-residents. Such securities include shares, government bonds, corporate bonds, non-convertible debentures and units of business funds.
Numerous benefits arise from receiving a Category I FPI License including:
- Exemption from Indirect Transfer provisions under the Indian Income-tax Act, meaning that any change in the value of units in an FPI outside India is not subject to capital gains tax in India
- Eligibility to invest in Offshore Derivative Instruments (ODIs)
- Lighter KYC requirements
- Enhanced trading limits to invest in derivatives
Undeniably, such an initiative offers great potential for cooperation between the two countries and creates new opportunities for expanding the Cyprus fund industry.
Cyprus is a unique jurisdiction not only for EU-regulated fund management solutions, for EU inward investments, but also as a vehicle for investments outside the EU. As an EU member, it has adopted all EU directives and regulations regarding Alternative Investment Funds (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS). In combination with its strategic geographical location, low setup and maintenance costs, as well as several tax incentives, Cyprus offers the safety and stability that investors are looking for, in a constantly evolving market.
Whether you are a HNWI or a venture capitalist, Nobel Trust can offer you professional advice on local and international investment fund matters. Please contact us for further information or assistance.
25 May 2022: Cyprus-based Investment Funds being eligible for Investments into India.
by: Nayia Morphi