A Cyprus International Trust is a legal vehicle based on the English Common Law, utilized mainly by High-Net worth Individuals for Assets Protection, Tax Planning and Wealth Management. It provides confidentiality and security and at the same time enjoys the benefits of the attractive tax system of Cyprus.
LEGAL FRAMEWORK
- A Cyprus International Trust (CIT) is governed by the Cyprus International Trusts Law of 1992 (as amended) (“CIT Law”), which has undergone recent amendments to modernize the concept of trusts in Cyprus and attract a wider range of high-net-worth individuals.
- The register of beneficial owners of express trusts and similar legal arrangements, which is administrated by the Cyprus Securities and Exchange Commission (“CySEC”) is created as part of the amendment of the Prevention and Suppression of Money Laundering and Terrorist Financing Law 188(I)/2007. On 23 February 2021, Cyprus incorporated the provisions of the 5th Anti-Money Laundering EU Directive 2018/843 into its domestic legislation.
- A CIT is subject to a stamp duty of €430. A late payment penalty is applicable for trust deeds is stamped more than 30 days after the date of creation of the trust. The amount of the late payment depends on the length of the delay.
REQUIREMENTS
To qualify as a CIT the below requirements must be met:
- The settlor is not a permanent resident of Cyprus during the year preceding the year of establishment of the trust.
- The beneficiaries are not permanent residents of Cyprus during the year preceding the year of establishment of the trust, but relocation to Cyprus the year after the establishment of the trust is permitted.
- At least one trustee is a permanent resident of Cyprus.
REGISTRATION
- The details of the CIT and its beneficial owners and classes of beneficiaries are submitted to CySEC. However, access to this register is restricted only to government statutory authorities under specific conditions.
- There is a one-off registration fee of €30 when the CIT is registered in the register of trusts maintained by CySEC.
BENEFITS
Asset Protection
Wealth is protected from potential legal threats and claims, ensuring that assets are securely managed and protected under the robust legal framework of Cyprus.
A CIT may be used to protect assets and will not be void or voidable in the event of the settlor’s bankruptcy or liquidation. However, it may be set aside by the settlor’s creditors if it is proven to the satisfaction of a Cyprus court that the intention of the settlor created the CIT, was to defraud his/her creditors.
Preservation of Wealth
A CIT facilitates the long-term management and preservation of family wealth by ensuring a gradual distribution of income and capital to children and grandchildren by the trustees, without burdening the children with the responsibility of managing the family wealth themselves.
Taxation
- Income, gains and profits from non-Cyprus sources are exempt from income tax, capital gains tax, special defence contribution or any other taxes in Cyprus.
- 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 Cyprus sourced income in accordance with Cyprus income tax laws. Dividends received by a CIT are not taxable and not subject to any withholding tax in Cyprus.
- There is no estate duty or inheritance tax in Cyprus.
Succession Planning
Ensure a smooth transition of assets to future generations without the constraints of foreign inheritance laws, providing a stable and structured distribution according to settlor wishes.
- Assets can be added to the CIT at any time.
- The CIT’s assets are permanently separated from the settlor’s personally owned assets.
- The trust property can include Cyprus immovable property, and all kinds of assets situated anywhere in the world.
- The CIT can be a shareholder in a Cyprus or foreign company.
Robust legal framework
- Any question regarding the validity or administration of a CIT is subject to the laws of Cyprus without reference to foreign legislation if the chosen law of the CIT is the law of Cyprus.
- The CIT or the dispositions of trust assets may not be challenged on the grounds that they are conflicting with the laws of another jurisdiction, e.g., regarding family and succession issues, or on the grounds that the other jurisdiction does not recognise the concept of trusts if the chosen law of the CIT is the law of Cyprus.
Reserved Powers
- Certain powers can be reserved to the settlor, but the trustee’s legal discretion cannot be compromised.
- A protector(s) may be appointed to oversee the activities of the trustees and to provide comfort to the settlor and/or the beneficiaries.
Duration
There are no limitations on a CIT’s duration, apart from when the trust deed specifically provides to the contrary.
CYPRUS PRIVATE TRUST COMPANIES(PTCs)
- A PTC is a private company with its sole purpose being to act as a trustee of a specific CIT or a group of related CITs. The trustee decisions of the CIT are made by the board of the PTC.
- PTCs are attractive for high-net-worth individuals and families who want to retain control over the management of the trust, as the settlor can appoint his trusted advisors to the PTC board.
- The shares of a PTC do not have to be held by the client directly, but rather can be held via another corporate vehicle, such as a purpose trust.
- A Cyprus PTC is exempted from the requirement to hold a trust business licence. This exemption is built on the principle that the Cyprus PTC only provides trust services to the family trust and its related trust(s) and that it does not solicit trust business from, or provide trust services to, the public.
