Cyprus International Trusts

Concept of a trust

In the simplest terms, under a trust, trustees, who get no benefit from the trust, are required to hold property of which they are the legal owners for the benefit of other persons, known as "the beneficiaries".


Trust Law in Cyprus
Cyprus Trust Law is based on:

a. The Trustees Law (Cap 193) which largely adopts the text of the English Trustee Act 1925;
b. equity and case law in England;
c. The International Trusts Law 69/92 enacted in 1992 with the aim of providing incentives for the establishment and administration of trusts in Cyprus by non-residents.
The latter has enabled the creation in Cyprus of what is called "International Trusts", that is, trusts set up under the provisions of the International Trusts Law. The Exchange Control and Income Tax laws exempt such trusts from income tax, capital gains tax and estate duty tax, making International Trusts a very attractive tax planning vehicle for the non-resident investor.
The establishment of in international trusts in Cyprus depends upon the fulfillment of the following criteria:


a. The settler must not be a permanent resident of Cyprus; (a Cyprus IBC will qualify as a settler);
b. The beneficiaries (with the exception of charities) must not be permanent residents of Cyprus;
c. The trust property must not include any real property situated within Cyprus;
d. A minimum of one trustee is resident in Cyprus (a Cyprus IBC or partnership is considered a resident trustee).

This offers the possibility to the settler to arrange his business in the way that best suits his own needs. If for example, the object is for the settler to maintain total control over the management of the Trust, he may arrange this in the following way:

1. The settlor sets up a Cyprus IBC under the existing favorable conditions for the set up of such entities;
2. The shares of the IBC beneficially belong entirely to the settlor although they may be held by nominee shareholders for confidentiality purposes;
3. The settlor may be appointed sole director of the IBC;
4. The IBC could act as the sole trustee of an International Trust to which the assets of the settlor are transferred.


Uses of Cyprus International Trusts

Cyprus International Trusts can be used for:

1. Tax mitigation / planning
2. Asset insulation & protection
3. Overcoming forced heirship law
4. Making use of double tax treaties as double taxation treaties are often accessible via the trustees of a Trust!
5. Avoiding dissipation of wealth

Other Advantages of the Cyprus International Trusts include:

a. An international trust is irrevocable (unless special provision to the contrary is made in the instrument creating the trust);

b. The rules against perpetuities do not apply to international trusts which may last for a hundred years;

c. accumulation of income is valid for any period for the entire duration of the trust and there is no limitation on the kind of investments in which the assets of an international trust may be put;

d. The 1992 International Trusts Law provides that purpose trusts are valid and are enforceable either by the settlor (or his/her personal representatives) or by the individual designated in the Trust instrument as having the right to enforce. This individual may also be a beneficiary under the Trust;

e. The 1992 Law also provides that if the terms of the Trust Instruments so permit, the proper law of the trust may be changed from or to the Law of Cyprus provided that (i) in the case of a change from the law of Cyprus to the law of another jurisdiction, the new proper law would recognise the validity of the trust and the respective interests of the beneficiaries; (ii) in the case of a change from the law of another jurisdiction to the law of Cyprus, this change is recognised by the proper law of the trust previously in effect;

f. Variation of the provisions of the trust is possible by order of the Court;

g. There are no registering or reporting requirements of any nature. Nor the government, nor the Central Bank of Cyprus may disclose to anybody any information pertaining to the identity of the settlor, the beneficiaries, the trustees and their duties, or the accounts or assets of the trust. Only a court may order the disclosure of information or the presentation of documents pertaining to the above in civil or criminal proceedings, and to do so, disclosure must be deemed very important to the outcome of the case.


2012 Amendments to the Cyprus International Trusts Law (CIT)

The Amendment to the Cyprus International Trusts Law (CIT) 2012 passed by the House of Representatives on 8 March 2012 introduces significant changes that take into account the realities of the Cyprus economy today and are in compliance with EU law and directives. As a result of the changes the CIT law is now considered one of the best in Europe and compares favorably with the world's most attractive trust jurisdictions.

The key changes introduced by the amending law are summarized below.

Effect on pre-existing trusts
The amending law applies to all CITs irrespective of their time of incorporation.

Revised definition of a CIT and residency issues
The provisions of the 1992 law, a CIT could only be established by a non-Cyprus resident settlor for the benefit of non-Cyprus resident beneficiaries, with the exception of charitable institutions. However, uncertainty existed as to whether a settlor and/or beneficiaries could relocate to Cyprus at any time in the future, following the establishment of a CIT.

Clarity on this matter is now provided in the amending law in that the settlor and the beneficiaries (other than charitable institutions), must not be residents of Cyprus during the calendar year preceding the year of creation of the trust, but may take up residency in Cyprus at any time following its creation. It is also noted that the term ‘beneficiaries' now also includes unborn beneficiaries.

Investing in movable and immovable property in Cyprus
The amending law expressly enables trustees to invest in movable and immovable property in Cyprus and abroad, including shares in Cyprus companies.

Thus a settlor and/or the beneficiaries may seek residency in Cyprus after the creation of a CIT.

Validity of an international trust and exclusion of foreign law
The amending law expressly provides that any issues arising in relation to the CIT including, but not limited to, issues in connection with the validity, interpretation or administration of, or disposition to, a CIT and the powers and duties of the trustees, protectors or enforcers shall be determined by the laws of Cyprus without reference to the law of any other jurisdiction.

Furthermore, the laws of Cyprus or the law of any other jurisdiction in relation to inheritance or succession shall not affect in any way the validity of the trust or any transfers or dispositions thereto. This exclusive jurisdiction of Cyprus laws over CITs successfully addresses asset protection concerns.

Reserved powers of the Settlor with great flexibility
The amending law introduces a new section that enables the settlor of a trust to reserve powers to himself or herself, to retain rights over, or interest in, the trust property and to act as a protector or enforcer of the trust without these affecting the validity of the trust.

Such reserved powers give settlors great flexibility and include the right:

  • to revoke, vary or amend the terms of the trust;
  • to act as a director or officer or to give binding directions for the appointment or removal of directors or officers of a company belonging to a trust;
  • to apply trust income or capital or to give directions to this effect;
  • to give binding directions to the Trustee in connection with the trust property;
  • to appoint or remove any trustee, enforcer, protector or beneficiary, investment manager or investment consultant;
  • to change the governing law or forum of administration of the trust;
  • to limit the powers of the trustees by stipulating that these are exercisable only with the consent of the settlor or any other person so specifies in the terms of the trust;

Duration of a CIT - no maximum duration
The 1992 law provided for a maximum duration of a CIT, being 100 years from the date of creation of the trust. An exemption was available for charitable and purpose trusts which were able to continue in force in perpetuity.

This has now been changed by the amending law and trusts that are created from the effective date of the amendment onwards, and subject to the terms of the trust, shall not be subject to a maximum duration and therefore are valid indefinitely.

Authorised investments - Extension of trustees' powers & responsibilities
The amending law provides for wider trustee investment powers.

The 1992 law gave wide powers of investment to the trustees to be exercised with the diligence and the prudence which a reasonable person would be expected to exercise when he or she makes an investment. The amending law extends the trustee powers further in that it enables him or her to act as the absolute owner of the trust property in exercising the said powers.

Under the amending law the trustee is also now expressly obliged to comply with the anti-money laundering laws of Cyprus.

Choice of law clause and public policy offers greater protection
CITs with a choice of law clause in favour of Cyprus law are by virtue of the provisions of the amending law subject to the provisions of the International Trusts Law not withstanding any other Cyprus Law provisions on conflict of law, and are as such protected from unsubstantiated foreign legal claims as a ‘matter of public order'.

Taxation of CITs continues to be most favourable.

The amending law expressly provides that:

  • A Cyprus tax resident beneficiary will be taxed in Cyprus on income and gains of an international trust sourced in or outside Cyprus shall be taxed in Cyprus.
  • A non-Cyprus tax resident beneficiary shall only be subject to Cyprus tax on Cyprus-sourced income.

Therefore, a CIT with non-Cyprus resident beneficiaries and income from non-Cyprus sources continues to be exempt from Cyprus tax.


The above is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Libor Ltd will be glad to assist you in this respect. Please contact us for appropriate professional advice.

Copyright © 2010-2013 | Powered by OnCyprus