CYPRUS INTERNATIONAL TRUSTS
Trust is an obligation on the holder of property (the “trustee”) to manage that property (the “trust property”) for the benefit of another (the “beneficiary”). The legal title to the trust property is vested in the trustee by its previous owner (the “settlor”). The trust property is managed by the trustee in accordance with the instructions of the settlor. These instructions are usually written and expressed in a trust deed of will (the “trust instrument”). The most important thing to note is that, even though the trustee has legal ownership of the trust property, it does not belong to him. Beneficial ownership of it belongs to the beneficiaries. The settlor can provide the trustee with a letter of wishes in a latter stage, as guidance to the trustee’s actions. The trustee is not legally bound to follow the instructions of the settlor.
International Trusts in Cyprus are based on English Law, and are mainly regulated by the Trustee Law, Chapter 193 and the International Trusts Law of 1992 as they are amended. The recently amendments have improved the Trust regime in Cyprus.
Under the Cyprus International Trusts Law, an international trust is described as a trust created by a non-resident settlor for the benefit of non-resident beneficiaries.
The law goes further in providing that:
- The settlor of the international trust, being any person who is of full age and of sound mind, must not be a resident of Cyprus in the year preceding the year of the creation of the international trust;
- No beneficiary, other than a charity, should be a resident of Cyprus in the year preceding the year of the creation of the international trust; and
- There must be at least one trustee resident in Cyprus at all times who can be physical person or legal entity.
A Trust can appoint a Protector, a person other than the trustee, to whom powers of any nature has been granted by the Trust Deed, including the power to veto the decisions of the Trust and also to appoint or cancel the appointment of the Trustee.
A Cyprus trust has no limit on its duration and may be valid and enforceable without containing a fixed maturity date.
Any issue relating to a Cyprus international trust shall be determined in accordance with the applicable law of Cyprus and no reference to the laws of any other jurisdiction will be made.
The settlor under a Cyprus trust is provided with a right to reserve certain powers under Article 4A of the Law, whether retained or given to him in his capacity as a protector or inspector for the application of the trust or otherwise.
Pursuant to an amendment of the Cyprus International Law and the Law of the Provision of Administrative services (known as the ‘fiduciaries law’’) in 2013, it is now required that all Trusts be registered with one of the three authorities supervising and regulating the provision of Trust services and for a Trust registry to exist containing specific information of Trusts.
Subject to the provision of the Trust Deed there is a limited/no scope involvement of the Cyprus Courts in the administration of a Cyprus International Trust. Nevertheless it is possible for the Trustee, to apply to court for directions on how he/she will act in regards to the particular Trust-related matter.
Taxation on Cyprus trusts will be considered on the basis of the beneficiaries’ residence.
The income and gains of an international trust from sources within and outside Cyprus where the beneficiary is resident in Cyprus, are subject to any taxation which is imposed in Cyprus. On the other hand, where the beneficiary is not resident in Cyprus, only the income and gains of an international trust from sources within Cyprus will be subject to taxation in Cyprus.
Exchange Control: An individual with assets outside his country of residence and whose country of residence may in future extend its exchange control restrictions to include remittance of overseas funds, may wish to retain the flexibility of overseas funds by transferring them to a Cyprus International Trust.
Confidentiality: An individual who wishes to keep anonymity can do this by setting up a discretionary trust which owns the shares in the company. This is a particularly useful tool and a popular vehicle for carrying out trading and financial activities, particularly for residents of countries which do not recognize the concept of a Trust.
Global Estate planning: An individual, through the use of a trust, can arrange to be succeeded in inheritance by persons, who, due to the legislation of the individual’s country, would otherwise be excluded from the inheritance.
Asset Protection: Individuals from volatile parts of the world may wish to protect part of their fortune from high domestic inflation rates by converting it into strong currency assets, or individuals can protect their assets against possible expropriation laws, future claims of Governments, law suits or international blocking or freezing regulation overseas. There is a 2-year time limit from the date of transfer of trust property to the Cyprus International Trust to file such an action with the Cyprus courts.
Avoidance of force rules (will): Succession rules do not affect the validity of the transfer made to a Cyprus International Trust, as the transfer takes place during the life time of the settlor
Wide investment capabilities: The trustee is able to invest trust funds in any kind of investment. The income is accumulated for the whole perpetuity period with no forced distributions.
Please contact us for further assistance.