Cyprus International Trusts

Cyprus International Trusts are governed by the International Trusts Law, 1992 which regulates the establishment and administration of International Trusts. It has been completed by new amendments in March 2012.

Under this law, Cyprus International Trusts are defined as those where:

  • The settlor and beneficiaries can relocate to Cyprus and become tax residents of Cyprus on the condition that both of them were not residents of Cyprus during the calendar year which precedes the year of the establishment 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
  • The trust property can now include any movable or immovable property abroad and or in the Republic of Cyprus as well as shares of companies registered in Cyprus

Cyprus International Trusts and the Tax Aspect

Cyprus International Trusts enjoy very important tax advantages, providing significant tax planning possibilities to interested parties.

The following advantages are indicative of the possible tax minimisation options:

Income
All income whether trading or otherwise of an International Trust, is not taxable in Cyprus.

Dividends
Dividends, interest or other income received by an International Trust from a Cyprus Company are neither taxable nor subject to withholding tax.

Capital Gains
Gains on the disposal of the assets of an International Trust are not subject to capital gains tax in Cyprus.

Estate Duty
An International Trust created for estate duty planning purposes would not be subject to estate duty in Cyprus.

Trusts may be used by individuals for the purpose of protecting their assets, for inheritance purposes or by employers to set up employment benefit scheme trusts for their employees.

International Trusts and Other Aspects

International Trusts can provide further advantages other than tax savings.

Estate Planning
Through the use of a Cyprus international Trust, an individual can ensure that minors, mentally handicapped persons or persons that cannot be trusted with the management of the individual’s estate are well provided for, even after the individual’s death.

A Cyprus International Trust can be used to arrange for a person to inherit, where due to the legislation of the individual’s country, would otherwise be excluded from inheritance.

An individual who wishes to divest himself of personal assets for various reasons can achieve that by transferring them to a Cyprus International Trust.

Anonymity
An individual who wishes to keep the ownership of a company anonymous and confidential can do this by setting up a Discretionary Cyprus International Trust to own the shares in the company.

Maintaining Funds Overseas
An individual who has or may have income arising overseas which he/she does not wish to remit to his country of residence, can arrange for such income to be directed to the Trustees of a Cyprus Settlement to be held on Discretionary Trusts in accordance with his/her wishes.

An individual with assets outside his country of residence, which country may in future extend its exchange control restrictions to include remittance of overseas funds, may wish to retain the flexibility of overseas funds by transferring them to a Discretionary Trust.

Other Advantages

Favourable Legal System

The favourable legal system relating to Trusts, together with the advantageous geographic position of the island, make Cyprus a particularly attractive location for the establishment and operation of Trusts.

No Exchange Control

As from 1 May 2004, Cyprus is a full member of the European Union and the Eurozone. Exchange Controls have been abolished from that date. Deposits of Cyprus International Trusts with Cyprus Banks, either onshore or offshore, or with any bank around the world, are also not subject to exchange control. The absence of exchange control restrictions and the availability of excellent telecommunications and international banking services, make Cyprus a convenient base for the remittance and transfer of funds.

Management Services

The presence of a number of reputable international fund management companies on the island and the high standing of the legal and accounting professions ensure the availability of expert advice as well as the competent management services required for the proper operation of a Trust.

Confidentiality

The 2012 amendments state that no information and/or documentation can be disclosed by the trustee, protector or trust enforcement supervisor in relation to the accounts of the Trust, the terms of the Trust Deed or the identity of the beneficiaries or trustees, unless a Court order is issued.

Flexibility

Cyprus law is flexible in that it allows the removal of a Trust from its jurisdiction and vice versa. This could be important in cases where a change in circumstances may render such a transfer advantageous for various reasons.

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