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Trusts

The legal subject of international trusts in Cyprus is governed by the International Trusts, Law 69(I)/1992 as amended by the relatively new Law 20(I)/2012 (collectively referred to as the “Law”), which allows Cyprus to pride for its favorable regime amongst the most famous offshore jurisdictions in the area of trusts.

The Law, as has been amended, recognizes and considers as legal and valid the perpetual character of a trust settlement. The new Law has also abolished the legal restriction which prevented the inclusion in the trust property of immovable properties situated in Cyprus.

For high net worth individuals, asset planning is paramount; hence, the Cyprus International Trust is an effective legal way to place the assets of such individuals beyond the reach of creditors, or for any other personal reason. A trust may also be created for confidentiality or charity purposes, for estate planning or investment purposes.

Briefly, under the Law, a “Cyprus International Trust” is determined as being the trust in respect of which:

The settlor is not a permanent resident of Cyprus.

At least one of the trustees resides permanently in Cyprus for the whole period of the Trust.

No Beneficiary, other than a charitable institution, is a permanent resident of Cyprus during the year preceding the creation of the trust settlement.

Either of the aforementioned persons can be an individual or a corporation.

The Law is very liberal on the powers and authorities that may be conferred to the Trustee(s) and gives wide discretion on the Settlor to decide whether to retain some or any of them, to entrust them to, or to ensure their application and enforcement by appointing, a Protector or Enforcer of the trust settlement.

Tax Benefits

The propitious legal system concerning trusts coupled with the advantageous geographic position of the island, makes Cyprus a distinctly attractive trust location for persons who want to invest overseas, safeguarding that all the financial benefits received, including dividends, are remitted to another country in the most tax-effective way:

  • The income and gains of an International Trust derived from sources outside Cyprus are not taxable in Cyprus and no estate duty shall be levied in respect of assets belonging to the Trust.
  • Worldwide income, profit and gains are taxable in Cyprus only where the beneficiary is a Cyprus Tax resident; beneficiaries who are non-residents of Cyprus are taxed only on Cyprus sourced income in accordance with the Cyprus income tax laws.
  • Interest, dividends or royalties received by a Cyprus International business company are not taxable and not subject to any withholding tax
  • The CIT may also be used to distribute untaxed income in Cyprus to the beneficiaries, for instance family members.
  • Persons who intent to immigrate to a high tax jurisdiction may obtain tax advantages in their new country by protecting their assets in Cyprus.
  • In the case of non-Cypriot tax residents of the International Trust, only the income and profits from sources within Cyprus are subject to tax and in accordance with the tax provisions of the local law.
  • Persons with personal assets abroad and revenues emanating from overseas may dispose or transfer those to an International Trust established in Cyprus in order to escape from high tax or any levies whatsoever.
  • No registration formalities are required and therefore confidentiality is safeguarded, whereas no expenses are involved in this respect, other than legal fees and a stamp duty of €430.- which is necessary in order to legalize the trust instrument.
  • The trustee is allowed to invest at any time, part of, or the entire amount of the trust capital in any kind of investment, wherever this is situated, even if the trust capital has already been invested or not.
  • The settlor, trustee or beneficiary of the International Trust can be a Cyprus Company or Partnership with foreign member(s). The member(s) can be the settlor, trustee and/or beneficiary of the Trust.
  • It is also worth considering the fact that the Republic of Cyprus has signed double-tax treaties with fifty (50) EU and non-EU Countries, including Russia, Ukraine, USA, Germany, United Kingdom, China, India, the U.A.E., Greece, Canada, Qatar, Seychelles and other countries.
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