Cyprus International Trusts
Boasting an already attractive package as an international business and financial hub due to its unique location, modern infrastructure, accessibility, stability and great relationship with virtually all countries in the world, Cyprus has further advanced its unique position by fundamentally reforming its relevant trusts legislation over the years.
An increasing number of professionals chose Cyprus to set up their International Trusts due to the unique environment offered by Cyprus Law, which is based on the popular English law and principles to begin with. Nowhere else in the world can one find so many advantages concentrated in a single trust jurisdiction. The fact that Cyprus is a member of the European Union only adds to the already comprehensive package.
Some of the advantages of setting up trusts in Cyprus include:
- The establishment and administration of trusts is very attractively priced
- A unique blend of tax exemptions and double tax treaties
- Registration requirements are minimal
- High confidentiality / anonymity
- A comprehensive legal or otherwise infrastructure
- The flexibility and adaptability of the Cyprus International Trusts law
- The level of protection and flexibility provided to trust structures
- Possibility for a trust to be redomiciled to another jurisdiction
Now let’s look into the Cyprus International Trusts Law in detail:
The Cyprus International Trusts Law
The law governing Cyprus International Trusts (the “CIT”) is the International Trusts Law of 1992, as has been amended from time to time (the “Law”). The Law aims to attract non-Cypriot Tax Residents for establishing a hereditary vehicle in the Republic of Cyprus in order to protect their properties/private assets located anywhere in the world including property situated in Cyprus, and simultaneously benefit by Cyprus tax regimes.
Who are the main participants of a CIT?
- The Settlor is the person who creates the CIT and is the owner of the initial property placed under the CIT. He must not be a Cyprus tax resident the year before the establishment of the trust. Also, the Settlor must be of full age (18) and of sound mind in accordance with the law of the country which he is resident;
- The Trustee is the person (individual or company) who agrees to hold the trust property in his/its name for the benefit of the Beneficiary under the terms of the trust deed. The Trustee must be a Cyprus Tax Resident (or at least one of the trustees must be a Cyprus Tax Resident). The Trustee has the legal title to the trust assets;
- The Beneficiary (individual or company) who is entitled to a right or interest in property which is subject to the trust. The Beneficiary must not be a Cyprus tax resident the year before the establishment of the CIT. The term includes persons that were not yet born at the time of the creation of the Trust, and also persons who are part of a class of people;
- The Protector (not compulsory) is the person other than the Trustee to whom powers of any nature are conferred by the trust instrument, including the power to advise a Trustee as to the exercise of the trustee’s powers, the rights of the Trustee in respect of a consent or veto, and includes the right to appoint or remove a Trustee.
- The Enforcer means a person or persons whose duty is to enforce an international trust, with the exception of trusts for charitable purposes in accordance with the Law.
Can a CIT be irrevocable?
According to the Law, a CIT is irrevocable unless a specific power of revocation is clearly stated by the Settlor.
What is the applicable law and the respective court jurisdiction?
Pursuant to the provisions of the Law, the Settlor may choose the law which will govern the CIT. In cases where no applicable law has been chosen, then the CIT will be governed by the law which is more closely related to the CIT (the Law provides relevant guidelines in this respect).
Based on the provisions of the Law, the Cyprus Courts, if one of the following circumstances apply, shall have exclusive jurisdiction on a CIT:
- (a) where the applicable law of the Trust is the law of the Republic; or
- (b) where the Trustee is a resident of the Republic; or
- (c) where the company acting as a Trustee has been incorporated in Cyprus; or
- (d) where any asset of the Trust is situated in Cyprus; or
- (e) where the administration of the Trust is performed in Cyprus; or
- (f) where the parties to the Trust accept the jurisdiction of the Cyprus courts; or
- (g) where the Trust refers any dispute to the Courts of the Republic.
What are the advantages of a Cyprus International Trust?
I. Settlor may reserve powers
According to the Law, the Settlor may reserve for himself certain powers/rights either in his capacity as Settlor, or as Protector or as Enforcer of the Trust, such as:
- i. To revoke, vary or amend the terms of the Trust;
- ii. To grant, distribute, pay or dispose in any form of either income or capital of the Trust, or give instructions with respect to these;
- iii. The right to appoint or remove any Trustee, Enforcer, Protector, Beneficiary, Investment management or investment consultant;
- iv. To alter the applicable law of the Trust or the forum of the administration of the Trust;
- v. The ability to confine the exercise of the powers or the discretion of the Trustee by imposing a stipulation that these will be exercisable only with the consent of the Settlor or by any other person so specified in the terms of the Trust;
- vi. To give binding instructions to the Trustee in connection with the Trust property; and
- vii. The ability to act as director or officer or give binding directions with regards to the appointment or removal of any director or officer of any cooperation which is wholly or partially owned by the trust.
II. The CIT might be amended from time to time
The Law permits an alteration to the terms of the CIT if it is permitted by the CIT itself or after being approved by the Court.
III. The duration of the CIT
Provided that it is not otherwise indicated in the CIT, there shall be no limit on the period for which the trust is valid and enforceable.
IV. Confidentiality of CIT
First of all and most importantly, trust registers maintained by the competent authorities are not publicly available.
Furthermore, the Law prohibits the disclosure of any information or documents regarding the CIT by any person (including the Trustee). Only the court may allow such disclosure of information/documents, to the extent that such disclosure is important to the result of a particular civil or criminal proceeding.
Income or profits which are acquired or deemed to be derived from outside Cyprus are not taxable in Cyprus if the beneficiary is not a Cyprus tax resident. Income and profits sourced from Cyprus are taxable in Cyprus, irrespectively if the beneficiary is a Cyprus tax resident or not. Nevertheless, all income and profits of a CIT which are acquired or deemed to be derived from sources inside or outside Cyprus are taxable in Cyprus provided that the Beneficiary is a Cyprus tax resident.
Passive income (dividends/passive interest) received by a CIT from a Cyprus company are not subject to tax nor subject to withholding tax.
VI. Asset Protection
The Law provides that notwithstanding the provisions of any bankruptcy or liquidation laws in the Republic or in any other country, unless it is proven to the court that the CIT was established with intent to defraud the creditors of the Settlor, the CIT shall not be void or voidable.
Why Y. Argyrides & Associates LLC is the go to place to establish a Cyprus International Trust
Y. Argyrides & Associates LLC feature an established track of record in offering comprehensive business & legal solutions to international and local businesses here in Cyprus.
With decades’ worth of experience and the establishment of countless trusts for its clients, the firm is in the unique position to advice multinational clients as to the creation of trusts as well as to the choice of the best possible structure.
Furthermore, the firm may draft the trust instrument and any other legal document required under the Law.
Y. Argyrides & Associates LLC supports and assists clients in terms of provision of trustee, administration and management services for the CIT.
Lastly, the firm advises clients regarding any issue related to trusts under the Law, trustee powers, beneficiary rights, interpretation of trust deeds and other trust related documentation and represents them in court.
Looking forward to establishing an International Trust in the Republic of Cyprus?
Our experienced team is here to provide you with comprehensive services in all aspects of your business including setting up international trusts. We would be glad to disclose more information as well as offer our assistance. Feel free to get in touch with us by sending us an email at [email protected].