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
a. The Trustees Law (Cap 193) which largely adopts the text of the English Trustee Act 1925;
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);
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;
Uses of Cyprus International Trusts
Cyprus International Trusts can be used for:
Other Advantages of the Cyprus International Trusts include:
|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
Revised definition of a CIT and residency issues
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
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
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
Such reserved powers give settlors great flexibility and include the right:
Duration of a CIT - no maximum duration
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 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
The amending law expressly provides that:
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.