Alternative Investment Funds (AIFs) and AIFM are established in the European Union based on the rules transposing Directive 2011/61 / EU into their legal systems. Thus, a new law came into force in Slovenia in 2015, which generally regulates the field of AIF and AIFM.
Under current law, AIF means collective investment undertakings that raise capital by several investors to invest these funds following a defined investment policy for the benefit of those investors. The AIFM are legal entities whose regular business activity is the management of one or more AIS. Public fundraising in the form of AIF is a relatively new in Slovenia, but it has a long and successful story in other EU countries.
The AIF group mainly could consist of venture capital funds, real estate funds, start-up capital funds, development capital funds, hedge funds and/or others. One of the more popular investment strategies of modern times (investing in cryptocurrencies) also falls under the form of AIS.
AIS is popular throughout Europe and is often used as a form of asset collection and management due to its undeniable advantages.
Some of the advantages are:
1. AIF solves the fundamental problem of investors – the lack of funds for independent investment in the selected investment class.
This way, you will allow your investors to invest in a larger investment project. For example, you can invest in real estate in amounts that are lower than the total value of the property that investors would not be able to invest on their own. The same applies to the participation of investors in a loan fund, as their investment enables them to act as a lender within the fund, or in the redemption of receivables for which recovery for the fund is carried out by its manager. There is also the possibility to invite other investors to finance the protection of intellectual property rights and to enable the distribution of collected royalties through the fund.
2. AIF is a legally regulated (legitimate) form of asset collection
This means that the activity of management companies and existing AIF is monitored by a special state body – the Securities Market Agency (ATVP in Slovenia), which checks and ensures the legality of the company’s operations and compliance with all applicable legal regulations.
Due to distrust of other “illegal” providers, the investors were often reluctant to invest in the markets. The activity and business of AIF management companies is transparent and regulated therefore it is credible and trustworthy. Upon purchase of the fund’s units, the investor receives a purchase certificate in the form of a materialized security.
3. Tax advantages and reliefs of AIF and AIFM
Under the valid Slovenian legislation, the units of the fund are not taxed. The general rules of personal income tax on capital gains apply to the payouts of fund units. The tax base for the assessment of personal income tax on capital gains is the difference between the value of points at divestment and the value of points at acquisition. With each year the tax for the investor is reduced gradually until the investor becomes exempt from the tax after a certain period.
The manager only pays taxes related to its business, that is, the provision of fund management services. The fund itself is not a taxpayer and does not pay taxes on capital gains – this obligation lies with investors. According to the law, a management company is one of the entities for which a tax relief is provided for certain types of income from activities, such as a fund management fee.
4. A simple legal entity form that can publicly raise assets
The law allows easier conditions for setting up a company in the form of an AIFM compared to other legal structures that publicly collect assets in the same way. The law does not set minimum capital requirements that would be higher than usual for other types of legal entities. The legal relationship between the investor and the company is based on contractual autonomy, so the method of asset management is completely free and thus allows the implementation of diverse and imaginative investment strategies (investing in unusual investment classes, leverage, low investment diversification and more). At the same time, alternative investment funds offer a high degree of legal certainty, as the regulatory structure takes into account riskiness of such investments. For investors, entering and exiting the funds is easy while no licenses or other permits are required for the formation of AIF and AIFM.
Our company offers a full range of services from the creation of AIF and AIFM to monthly legal and financial advice to established managers.
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