CYPRUS INTERNATIONAL TRUSTS (CIT)
A trust arrangement is an obligation of the holder of property (the “trustee”) to manage that property (the “trust property”) for the benefit of another (the “beneficiary”).
The legal title to the trust property is vested in the trustee by its previous owner (the “settlor”). The trust property is managed by the trustee in accordance with the instructions of the settlor. It is important to be noted that even though the trustee has legal ownership of the trust property, does not belong to him, it belongs to the beneficiaries.
For a valid trust to be created, the following three certainties must be present:
a) Certainty of intention of the settler to create the trust.
b) Certainty of subject matter –the trust property must be readily identifiable, ie money, property, shares etc;
c) Certainty ascertained or ascertainable at the time of setting up the trust.
The Cyprus International Trusts Law of 1992 was subsequently amended on 23 March 2012 (click here for summary of amending law) with the aim of providing incentives for the establishment and administration of trusts in Cyprus by non-residents.
In order to establish an international trust:
• The settler must not be a permanent resident of Cyprus.
• No beneficiary other than a charity is a permanent resident in Cyprus.
• The trust property does not include any real property situated in Cyprus.
• There must be at least one trustee resident in Cyprus at all times.
Trusts, as such, are not taxable in Cyprus but the beneficiaries are taxable through the trustees.
Provided that there no income derived within Cyprus, there is no taxation on the income, capital or distribution of Cyprus International trusts.
Cyprus International Trusts enjoy significant tax advantages, providing important tax planning possibilities, including the following:
– All income of an International Trust is not taxable in Cyprus.
– Dividends, interest or other income received by a Trust from a Cyprus international business company are neither taxable nor subject to withholding tax.
– Gains on the disposal of the assets of an international Trust are not subject to capital gains tax in Cyprus.
– The assets of an international trust are not subject to estate duty in Cyprus.
Advantages of a Cyprus Trust
Trusts created in Cyprus offer many benefits including the following:
-Divesting of Personal Assets: An individual who wishes to divest himself of personal assets for various reasons can achieve that by transferring them to a Cyprus International Trust.
-Pre-Migration Arrangement: Individuals moving to country with high tax rate may obtain benefits by placing funds in an International Trust created in Cyprus.
-Investing in Business Overseas: An individual, who wishes to invest in business overseas but wishes to ensure that the profits and dividends received are not remitted to the country of his residence.
Investment Holding Company: A trust can be used in one country to own an underlying investment holing company in another. This provide the maximum possible protection for both settlor and beneficially alike.
Exchange Control: An individual who wish to retain the flexibility of overseas funds by transferring them to an International Trust created in Cyprus in order to be protected from exchange control restrictions in his country.
Legal System: The legal system is a common law system with trust legislation and case law.
Stability: Cyprus offers both political and economic as a full Member State of the European Union since 1st of May 2004.
Confidentiality: There is no registration or reporting requirements for trusts established in Cyprus nor are the names of trust or of the persons referred to in the trust deed disclosed. The only authority to be informed of the creation of an International Trust is the Central Bank of Cyprus and only in cases where bank accounts are opened in Cyprus. Again no names are disclosed.
Flexibility: Cyprus law allows the removal of a trust from its jurisdiction and vice versa. In this way it provides the necessary flexibility if such transfer would be advantageous because of change of circumstances.