Effective asset protection through Cyprus International Trust
A Trust can be a valuable tool for protecting your property especially when the Trust is established in such a favourable jurisdiction as Cyprus. Being extremely flexible, Cyprus International Trust make Cyprus one the best jurisdictions someone may choose to establish a Trust. Consequently, the establishment of Cyprus International Trusts by non-residents is constantly growing.
Cyprus International Trust
What is a Trust?
A Trust is an agreement between the Settlor and the Trustee by which the Settlor, who is the owner of the property which is intended to be placed under Trust, transfers to the Trustee the property to be held for the benefit of the Beneficiary. The Trustee has the legal title to the Trust property, whereas the Beneficiary has the beneficial title to the Trust property. The ultimate beneficial owner of the trust property is the Beneficiary. The role of the parties of a Trust is the following:
The Settlor is the natural or legal person who creates the trust. As stated above, the Settlor is the owner of the Trust property that will be transferred to the Trustee.
The Trustee is the legal or natural person in whose name the Trust property is transferred and who accepts to hold the Trust property for the benefit of the Beneficiary, under the terms of the Trust. The Trustee is responsible for the management of the Trust.
The Beneficiary is an individual, a company or any other entity which receives the benefits of the Trust property. In case of Discretionary Trust, the Settlor can define classes of beneficiaries instead of specifying certain persons or entities.
The Protector in an individual or a company which is appointed by the Settlor to protect the Trust property and the operation of the Trust in accordance to the terms of the Trust instrument. The protector is entitled to control the Trustee but not to intervene in his obligations and undertakings. Appointing of a protector is not compulsory.
The Cyprus International Trust
The International Trusts Law No. 69/92 as amended by Law 20(I)/2012 and Law 98(I)/2013 (the “Law”) created the Cyprus International Trust – a new type of Trust which provides tax planning benefits and asset protection features. For the formation of a Cyprus International Trust, neither the Settlor nor the Beneficiary can be a Tax resident of Cyprus the year before the establishment of the Trust - with the exception of charitable trusts - whereas at least one of the Trustees has to be resident of Cyprus. Moreover, the trust property can include all kinds of property anywhere in the world.
Advantages of Cyprus International Trust
Asset protection: A Trust enables you to protect the Trust assets from risks, claims by governments or creditors, spouses or former spouses and claims in tort or contact occurred because of transactions entered by the previous owner of the Trust property.
Difficulty to be void/voidable: It is very difficult for a Trust to be ruled to be void or voidable as the claimant has to satisfy the Court that the Trust was made with intention to defraud the creditors of the Settlor at the time when the payment or transfer of assets was made and such an action must be brought no later than two years after the transfer.
Protection against all inheritance laws: Inheritance or succession law applicable in Cyprus or any other country cannot in any way affect the validity of the Cyprus International Trust or any transfer or disposition of the Trust Property.
Tax benefits: Income, gains and profits from non-Cyprus sources are exempt from taxes in Cyprus. Dividends, interests or royalties received by a Cyprus International Trust from a Cyprus company are not taxable and not subject to any withholding tax. Furthermore, there is no estate duty or inheritance tax.
Protection for groups of companies: A Trust enables you to maintain your business as an entity by having a group of companies under a Trust. This is the reason why Cyprus International Trust is very often used as holding investment vehicle for a group of companies.
Reservation of Powers: The Settlor can reserve the powers to himself as per the Trust instrument, including but not limited to his power to revoke, vary or amend the terms of a trust, to appoint or remove any Trustee, Protector or Beneficiary and to give directions to the Trustee. The Settlor can also act as the Protector or Enforcer of the Trust.
Ability of the Settlor to give instructions: Further to the reserved powers as above, the Settlor is also entitled to give guidance to the Trustee on how he manages the Trust by drafting and providing the Trustee with a Letter of Wishes.
Confidentiality: The trustee owes duty of confidentiality to the Settlor and to the Beneficiaries. Any information or documentation of the Trust may only be disclosed subject to a Court Order or other request by governmental authorities which cannot be refused by law.
Information not accessible to general public: Under the Prevention and Combating of Money Laundering Law of 2007 (188(I)2007 (AML Law) of Cyprus, the beneficial ownership information for the Trusts will NOT be accessible to general public. The Cyprus Securities and Exchange Commission (CYSEC) shall keep as from 07/10/2022 a registry with all Cyprus Trusts and information about the beneficial owners of the Trusts (the ‘Registry’). The Registry is not accessible to the public. CYSEC is authorized to grant access to the Registry to the following:
- The responsible Supervisory Authority as defined by Section 59 of the AML Law, the Unit for Combating Money Laundering, Customs and Excise Department, Tax Department and Police without any limitations
- To obliged entities for due diligence purposes and identification of their clients upon payment of respective fee
- To legal or physical persons that can demonstrate legitimate interest in accessing the Registry and proving the same through relevant procedure, upon payment of respective fee.
- To legal and physical persons that file a written request with CYSEC in relation to an express trust, which holds or owns a controlling interest in a company that is not incorporated in Cyprus or another EU member state, upon payment of the respective fee.
Duration of Trust: As an outcome of the amendment of the Law in 2012, Cyprus International Trusts can be established with unlimited duration.
Other important benefits: Following the formation of the Trust, the Beneficiary or the Settlor can become Cyprus tax residents and an International Cyprus Trust may be redomiciled to another jurisdiction.
ΣΑΣ ΠΑΡΕΧΟΥΜΕ ΑΡΙΣΤΗ ΕΠΑΓΓΕΛΜΑΤΙΚΗ ΥΠΟΣΤΗΡΙΞΗ.
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