Cyprus International Trust
The applicable law relating to trusts in Cyprus is based on the Trustee Law chapter. 193 and on the International Trust Law 1992 to 2013 as amended law 2012, hereinafter collectively referred to as “The Law”.
Cyprus international trust is a form of estate planning, which is usually used by wealthy individuals irrespective of their domicile (place of residence) who wish to ensure the security of their assets for their family, while benefiting from the international tax planning.
A Trust is a legal arrangement where the settlor passes ownership of the assets pretrained in the trust to the Trustee for the benefit of the beneficiaries.
- The Settlor is the creator of the Trust.
- The Trustee is a legal or natural person, who holds or has trust property transferred to him or will be held by him, or is deemed to hold or have had trust property transferred to him, or is expected to have trust property delivered or transferred to him, to be held by him:
- for the benefit of a beneficiary irrespective of whether the trustee is also beneficiary of the trust; and/or
- for any purpose which is not for the exclusive benefit of the trustee.
- The beneficiary may be a legal or natural person including a person not yet born, such as a grandchild, at the time of the creation of the trust, or a person who is part of a class of people entitled to a right or interest in property which is subject to the trust.
A trust can be created in two forms:
- An individual Trust, where an official Trustee is appointed under the Trustee Law.
- Corporate Trust, where a corporation is appointed by the Court in any case to be a trustee, or a trust company is registered under the Companies Law.
Criteria of Cyprus international Trusts
The Cyprus International Trust regime offers overseas individuals who are not residents of the Republic to create a Trust in Cyprus in which they benefit from provisions of non-taxed residents of Cyprus. The trust may be classified as an International Trust when the below criteria are met:
- The settlor, being either a natural or legal person, is not a resident of the Republic during the calendar year immediately preceding the creation of the trust
- At least one of the trustees is a resident in the Republic during the whole duration of the trust
- No beneficiary, whether a natural or legal person, other than a charitable institution, is a resident of the Republic during the calendar year immediately preceding the year in which the trust was created.
Exception: A trust shall not fail to qualify as an international trust by reason only that any of the parties involved is a company or a partnership. The exception offers opportunities for high net worth individuals and investors, to maintain full control of the management of the trust, by using a Cyprus Company as the sole trustee in which the assets are transferred and held.
Validity of a Trust:
In general, it is noted that there are no formalities needed in creating a Trust in Cyprus, except where the trust is created by a Will.
The Three Certainties test:
Although there are no formalities needed for the creation of a trust the below criteria of the 3 certainties must be satisfied:
- Certainty to intention-the settlor needs to express an intention to create the trust
- Certainty to subject matter-The trust property must be readily identifiable otherwise the trust is void for uncertainty.
- Certainty of objects-The identity of all the beneficiaries of the trust must be ascertained or ascertainable at the time of setting up the trust.
Stamp Duty Expenses: An instrument creating an international trust shall be liable to stamp duty of the amount of 430 Euro to the Commissioner of Stamp Duty.
Other benefits of Cyprus International Trust
- Confidentiality – No information may be disclosed to any person who has no right by law to have knowledge of such documents and information, unless an Order for disclosure is issued by the relevant Court.
- Duration – Trust do not have an expiration date.
- A Trust setup may be used to protect assets against risks, future claims by governments or creditors.
- There is no registration or reporting requirements.
- It is possible for the Settlor and the Beneficiaries to relocate to Cyprus after the establishment of the Cyprus International Trust as the law allows them to do so on the condition that they were not residents of Cyprus before the establishment of the Trust.
- Taxation – If a Beneficiary is a resident of the Republic of Cyprus and of whom profits of International Trust are earned from sources within and outside the Republic shall be taxed. Moreover, in the event that the Beneficiary is not a resident in the Republic then profits earned from sources within the Republic of Cyprus shall also be taxed.
Power of the Settlor
A Settlor has the ability to reserve certain powers and rights, which does not affect the validity and execution of the Cyprus International Trust. Such powers include:
- to revoke or amend the terms of a trust or any trusts or powers arising wholly or partly under it;
- to advance, distribute, pay or otherwise apply income or capital of the trust property or to give directions for the making of such advancement, distribution, payment or application;
- to exercise the powers of a director or officer or issue binding directions as to the appointment or removal of a director or officer of any company, wholly or partly owned by the trust;
- to give binding directions to the trustee in connection with the purchase, retention, sale, management, lending, pledging or charging of the trust property or the exercise of any powers or rights arising from such property;
- to appoint or remove any trustee, enforcer, protector or beneficiary;
- to appoint or remove any investment manager or investment adviser;
- to change the applicable law governing the trust or the forum for the administration of the trust;
- to restrict the exercise of any power or discretion of a trustee by requiring that they are only exercisable with the consent of the settlor or any other person expressly specified in the terms governing the trust.