The law governing the formation and administration of international trusts in Cyprus is the Cyprus International Trust Law 20(1)2012.
The main trust characteristics are the following:
(a) the Settlor is not a tax resident of Cyprus during the year preceding the year in which the trust was formed; the settlor can relocate to Cyprus after the establishment of the trust.
(b) beneficiaries can also relocate to Cyprus after a year following the trust creation.
(c) the trust property can include any type of assets situated anywhere in the world, including Cyprus.
(d) at least one of the trustees must be a resident of Cyprus.
A basic structure consists of the Settlor who is the person who creates the trust and is the owner of the initial property placed under the trust. The Settlor may retain some powers for himself. The Trustee is the person (individual or company) who agrees to hold the property on trust for the benefit of the Beneficiary based on the provisions of the trust. The Trustee has the legal title to the trust property whereas the Beneficiary has an equitable title to the trust property.
The advantages of an international trust in Cyprus are listed below:
Asset Protection
- The trust may be used to protect assets from claims arising in relation to transactions entered into by the Settlor; such include negligence, breach of contract, claims of spouses or former spouses and so on.
- The trust may only be challenged on the ground that it was formed with the intent to defraud creditors with a 2 year limitation to bring legal action forward.
- Succession, heirship or foreign laws and court judgments from other jurisdictions do not invalidate the trust or the transfer of property to the Trustee.
Confidentiality and reporting
- The trustees are bound by confidentiality and may only disclose information or documents if ordered by a court in Cyprus or in certain circumstances required by the law.
- There are no reporting requirements in Cyprus for the trust.
- The trust property can be the shares of a Cypriot company with a Cypriot nominee shareholder who will hold the shares of the company for the beneficial owner.
Tax benefits
- Income, gains and profits from sources outside of Cyprus are exempt in Cyprus from income tax, capital gains tax, special defence contribution or any other taxes.
- Worldwide income, profit and gains are taxable in Cyprus only where the beneficiary is a Cyprus tax resident; beneficiaries who are non-residents of Cyprus are taxed only on the income derived in Cyprus.
- Dividends, interest or royalties received by a trust from a Cyprus international business company are not taxable and not subject to withholding tax.
- There is no estate duty or inheritance tax in Cyprus.
- The trust may be used to distribute untaxed income in Cyprus to the beneficiaries, such as family members.
Other advantages
- The proper law of the trust is the Cypriot law; the law of the trust may be changed to another foreign law.
- The trust may last for an indefinite period of time.
ServPRO can offer its clients professional advice for the planning of the appropriate form of a Cyprus International Trust and assist them with the establishment and administration of the trust including the provision of trustee services.
For more information please contact us at info@servpro.com.cy