Cyprus Trusts

The House of Representatives of the Republic of Cyprus enacted the awaited International Trusts (Amending) Law of 2012 effecting various structural amendments to the International Trusts Law of 1992.

A trust is a legally binding arrangement whereby a person (the Settlor) transfers assets to the trust which is run by another person (the Trustee) who takes legal title to the trust assets.  The Trustee holds the trust assets for the benefit of other persons (the Beneficiaries), or for a specific purpose.

International Trust

This is when a non – resident settlor sets up a trust for a non-resident beneficiary.

Trust Law defines an International Trust as a trust where:

–          The settlor is not a permanent resident in the Republic of Cyprus in the year preceding the formation of the trust

–          At least one of the trustees during the whole duration of the trust is a permanent resident in the Republic of Cyprus;

–          No beneficiary, other than a charitable institution, is a permanent resident of the Republic of Cyprus in the year preceding the formation of the trust; and

–          The trust property can now include any immovable property situated in the Republic of Cyprus

 

Validity of the trust

 

A trust is valid if the settlor is of full age and of sound mind regardless of any provisions relating to inheritance or succession of the laws of Cyprus or of any other country. The international trust cannot be set aside by the creditors of the settlor unless the creditors can show that the trust was set up with the intention of defrauding them. The creditors have the burden of proof.  The creditors have a time frame of two years from the date of transfer of assets to the trust to bring an action against the trustees to void the trust on grounds of fraud.

 

An international trust is exempt from the obligation of registration.

 

Confidentiality relating to International Trusts

 

Unless a court order is issued, the trustee, the protector, or any other person cannot disclose any documents or information, related to the trustees, the beneficiaries, or the Cyprus Trust.  For information to be disclosed a court order must first be obtained and the court order is necessary and material for the case.

Duration of International Trust

The amendment to the law allows a trust to carry on indefinitely and there is no longer the provision that the trust is for a period of one hundred years.

 

Taxation

Cyprus International Trusts benefit from important tax advantages, providing significant tax planning possibilities. Income and gains of an international trust derived from sources which are outside of Cyprus are exempt from all kinds of tax in Cyprus and no Cyprus estate duty is chargeable in respect of assets belonging to an international trust created in Cyprus.

 

ADVANTAGES OF CYPRUS TRUSTS

Protection against high tax

In high tax jurisdictions it is possible to minimize tax on income/wealth by transferring property to a Cyprus International Trust.  With a proper tax structure and the beneficial double taxation treaty network Cyprus has with many countries, tax benefits are significant.

Holding property that cannot personally be held

Under some laws a minor who is not of legal age may not be able to have property registered in his own name but the property can be held in a trust for the minor’s benefit.

Protection against profligate future generations

A trust is a useful tool which can protect the assets of a family for future generations to avoid profligate future generations from carelessly wasting the assets of the family.

Charities

A  Cyprus international Trust can be set up to provide for a charity or other not for profit organization or simply to promote a worthy cause.

Protection of assets

Assets can be placed in a Cyprus International Trust to protect the assets and the interests of the beneficiary from law suits, negative economic conditions such as high inflation rates, weak currencies or unstable political factors which may lead to expropriation and claims by Government.

Transferring of personal assets

For tax or other reasons personal assets may be transferred to a Cyprus Trust.

Investing in business overseas

For an individual who wishes to invest overseas a Cyprus Trust can be set up and the profits and dividends received from the overseas business may be not remitted to the country of his residence.

Anonymity

An individual who does not want to disclose ownership of a company for confidentiality and anonymity purposes, can do this by setting up a discretionary Cypriot trust to own the shares in the company

Estate planning

A trust is a useful tool which can be used for transfer assets to a beneficiary who would otherwise not be allowed any inheritance due to the laws of the country i.e laws which state that only surviving family members are entitled to the estate of the deceased and there is a limit on the amounts which can be given to non-family members.

It is important to note that all matters which relate to a Cyprus International Trust are determined in accordance with the laws of the Republic of Cyprus and the Cyprus Courts have jurisdiction.

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