articles | 12 May 2014 | Chryssafinis & Polyviou

Why Choose a Cyprus Trust?

On 9th of March 2012 the Cyprus Parliament enacted Law 20(I)/2012 which amended and modernized the previous Cyprus International Trust Law 69(I)/1992 and leading the way for Cyprus to emerge into a major trust jurisdiction.

Taxation

  • The Income and gains of a Cyprus international Trust derived or deemed to be derived or deemed to be delivered from sources inside and outside of Cyprus shall be subject to all taxes imposed in Cyprus in the event that the beneficiary is a resident of Cyprus.

Where the beneficiary is not a resident of Cyprus the income and gains of a Cyprus International Trust derived or deemed to be derived from sources inside the Republic shall be subject to all taxes imposed in Cyprus.

These tax provisions in the law mean that a Trust with non-Cyprus residentsand income from non-Cyprus sources will be exempted from Cyprus tax.

  • The only tax obligation is stamp duty of approximately €430 on the instrument creating the trust.
  • Dividends, interest and other income received by a trust from a Cyprus international business company are neither taxable nor subject to withholding tax.

Asset Protection and Irrevocability

  • The trust is not void or voidable in the event of the settler’s bankruptcy or liquidation unless it is made with the intent to defraud creditors;
  • A trust protects assets from any malicious law suits and from the risk of unforeseen financial difficulty and political stability;
  • In the absence of express provision in the instrument creating the trust, a trust shall be deemed irrevocable by the settler and his legal representatives.  The new 2012 Law abolished all restrictions on the duration of trusts and for trusts created on or after the amendment there is no limitation regarding the duration of the continuation of the validity and enforceability of the trust.

Furthermore no rule against perpetuity or long term investment or any equivalent principle or rule shall apply to a trust or to any advancement, distribution, payment or disposition of property from the trust.

Subject to express terms of the trust to the contrary, no concession, distribution, payment, holding or disposal of the income or capital of the trust to another trust is invalidated merely by reason that the other trust continues to be valid and enforceable after the date on which the first trust must cease to exist.

Flexibility

  • Cyprus Law permits the governing law of the trust to be changed to a foreign law and also permits a foreign trust to adopt as its governing law the Law of Cyprus provided such change is recognized by the laws of the country concerned.
  • The settlor may revoke and/or modify any of the trust terms and to instruct the transfer, distribution or payment of income or capital from the trust property.

The settlor is also granted with the explicit power to appoint and/or remove a trustee, a beneficiary or a director of any of the companies that belong to the trust structure and to issue binding instructions to the trustee(s) in connection with the exercise of any power in relation to the trust.

  • The trustee, unless the instrument creating the trust provides otherwise, has the power to:
  • Invest at any time the whole or any part of the trust funds in any kind of investment as he would have done so if he were himself the absolute beneficiary of the assets of the trust;
  • Vary the investment or retain it in its original state;
  • Hold, maintain or invest in any movable property in Cyprus and abroad, including shares in companies created in Cyprus and in immovable property located in Cyprus of abroad.

Confidentiality

  • Section 11 of the Law prohibits the trustees or any other person from disclosing any information about the trust unless there is a court order mandating such disclosure.
  • There are no reporting requirements to any government authority on the activities of the trust and the names of the settler and the beneficiaries.
  • The trust provides complete anonymity with regard to the ownership of the assets the subject matter thereof.
  • Even though a trust must be registered with the relevant Cyprus Authority only limited information is disclosed for the purposes of registration such as the name of the trust and of the trustees, the date that the trust is set up, the date upon which the governing law of the trust may be amended and the date of termination of the trust

Variety

  • The trust property can include all kinds of assets situated anywhere in the world.

Cooperation Partners
  • Logo for Invest Cyprus
  • Logo for Cyprus Investment Funds Association
  • Logo for Association of Cyprus Banks
  • Logo for Cyprus Shipping Chamber
  • Logo for Ministry of Energy, Commerce, Industry and Tourism
  • Logo for Cyprus Chamber of Commerce and Industry
  • Logo for Cyprus In Your Heart
  • Logo for Cyprus International Businesses Association
  • Logo for CYFA Cyprus