Cyprus International Trusts
The main Trust law of Cyprus enacted in 1955 is based on the English Trustee Act 1925 and on the doctrines of equity and case law of England. In 1992 the law on Trusts was amended to introduce legislation to meet demands emanating from the globalization of trade, which resulted to the concept of the Cyprus International Trusts.
Characteristics of the Cyprus International Trust
The main characteristics of the Cyprus International Trust are:
- the settlor must be a non-resident of Cyprus
- with the exception of a charitable institution, the beneficiary must be a non-resident
- at least one of the trustees is at all times a permanent resident of Cyprus
- the trust property does not include any immovable property in Cyprus
Benefits from the use of a Cyprus International Trust
- no formal registration is required
- no taxation on any income or capital gains of the trust
- no estate duty is payable
- complete confidentiality is imposed on the trustees on the disclosure of financial or other information
- subject to the provisions of the Trust Deed, complete freedom of the trustees to invest the whole or part of the funds in any kind of investment
- the settlor may through a Cyprus international business company controlled by him, become a trustee or its sole trustee thus effectively managing the trust
Examples of Advantageous Uses
Protection against high taxation
For settlors resident in high taxation jurisdictions it is possible to minimise their taxation on income or wealth by transferring property to a Cyprus International Trust. Under a proper tax structure they will be able to take advantage of the beneficial double taxation treaty network of Cyprus and the non-taxability of any income of the trust in the island.
Obtaining confidentiality
Confidentiality is ensured as there is no requirement to register or publish the financial results of an International Trust. The Deed of the Trust is private to the parties concerned and no-one else has access to its contents. In many foreign jurisdictions when a person dies his will becomes open to public inspection. In the case of a trust, a corporate trustee does not die and the continuity of a trust is not affected by the death of the settlor.
Organising collective investment
Where several persons wish to make joint investments a trust can provide the basis of their co-operation and the sharing of the financial results of their joint venture.
Management vehicle
Investment Trust Funds, banks, and other financial institutions may use a trust and an international business company that acts as its trustee, to manage funds on behalf of their clients.
Holding property that cannot personally be held
A minor may not be able to hold property in his own name, but a trustee can often hold it for his benefit, through a Cyprus International Trust.
Protection against spendthrifts
Trustees can protect family fortunes for future generations by safeguarding capital and avoid it being frittered away by spendthrift beneficiaries.
Promoting causes and charities
Through a Cyprus International Trust a person may provide for a charity, promote a religious or artistic cause, or establish a foundation to support a worthy project.
Protection of assets
Assets can be placed into a Cyprus International Trust to safeguard the interests of a beneficiary, e.g. sheltering the inheritance of a daughter from claims in case of divorce. Professional partnerships may also find that a trust assists in providing custody for personal assets and safeguarding them from loss through litigation.
Managing profit sharing and pension schemes
Companies can provide pension schemes, benefit plans and profit sharing arrangements by using a trust with their employees forming the class of beneficiaries. The trust provides a most effective method for grouping and sharing benefits and it has the added advantage of being able to accommodate a rule book designed to suit each specific and individual circumstance.
Power to transfer jurisdiction
Under the new legislation a Cyprus International Trust may be transferred to another country’s jurisdiction and at the same time a trust already established in another jurisdiction may be transferred to Cyprus. This facility will help settlors wishing to relocate or benefit from the many advantages of Cyprus as a financial centre.
Formation
The formation of the trust is made by the signing of a Trust Deed by the trustees in which the settlor and the beneficiaries are named.
For more information on Cyprus International Trusts, contact us.
