🔹The mechanism of a mutual fund.

A mutual investment fund is a property complex, which is formed from the property of the participants and is managed by a specialized organization - the management company. A UIF participant receives from the management company an investment unit - a registered security certifying the share of its owner in the ownership right to a part of the fund's property.

Depending on the ability of the unit holder to sell his securities, there are three types of UIFs: (1) open - operations with units can be carried out any day; (2) interval - for operations with units is available only for a certain period of time; (3) closed - operations with units are usually limited: you can buy units only at the time of formation of the fund, and redemption of units is possible only after the project implementation or termination of the fund.

🔹Features of closed unit investment funds.

ZPIF is focused on attraction of investments for a certain, as a rule, long-term period. Term of a fund is from 3 to 15 years with a possibility of early termination or prolongation. The information on the structure of participants of ZPIF is not publicly available.

An additional feature of ZPIF is an opportunity of periodical payments if it is provided by rules of fund. As a rule, periodic payment of income in ZPIF is common for real estate funds, where it is not always possible to invest the received rental income in the target object of financing.

🔹Composition of ZPIF.

Money, real estate, vehicles, securities (shares, bonds), derivatives (futures, options), as well as other property provided for by the fund rules and applicable law may be transferred into trust management. At the same time, law practice recognizes that the unit investment fund is not a legal entity and acts as a separate property complex.

🔹Tax advantages.

ZPIF grants a number of tax privileges to founders. The advantages of ZPIF depend on the type of tax: (1) VAT; (2) corporate property tax; (3) transport tax and (4) corporate income tax.

VAT.

One of the most important advantages of ZPIF is the absence of VAT on operations with units. Thus, a member of ZPIF does not pay VAT: 1) when transferring the property in trust management; 2) when selling or redeeming units; 3) on operations with ZPIF property, which are carried out by the management company. The management company will be the payer of VAT on all these operations with the property of ZPIF.

Property tax and transport tax.

After the transfer of property (real estate, vehicles) in the form of a contribution to the fund, the ZPIF's shareholder is exempt from the obligation to pay the relevant taxes - the management company assumes this obligation.

Corporate income tax.

A unit holder is obliged to calculate and pay income tax on transactions with ZPIF units only in the following circumstances:

🔹Upon redemption of fund units or upon their sale on the secondary market.

The income received by the organization from the sale / redemption of units is reduced by the following expenses: 1) the purchase price of these units 2) the amount of expenses related to their purchase and sale, 3) the amount of contribution in cash.

🔹Thus, the shareholder will pay income tax only on the positive financial result obtained. When receiving interim income on units, if such payments are stipulated by the fund's rules.

Summarizing the above, the following advantages of investing in a ZPIF can be highlighted: 

🔹Investment:

-In case of liquidation of the management company (deprivation of license, bankruptcy, etc.) the right of ownership of the property of ZPIF is retained by the unit holders. Claims of creditors against the management company do not apply to the property of ZPIF.

-All profits and losses of ZPIF are balanced centrally by the management company.

-Information on the composition of ZPIF participants is not disclosed and is available to a limited number of persons.

🔹Tax:

-Transactions with ZPIF units are not subject to VAT, real estate and vehicles transferred to the fund cease to be an object of taxation with the shareholder.

-Deferral of profit tax payment within the ZPIF.

-No double taxation - a ZPIF shareholder pays tax only when redeeming or selling a unit and reaching