A Cyprus International Trust allows persons to plan the succession and transfer of their accumulated wealth to the next generation or to a class of persons. For other possible uses of the Cyprus International Trust please visit this post. The law was amended a few years ago and in this post, I took a deep dive into its provisions, how these vehicles are affected by the various mandatory disclosure rules as well as the reasoning behind establishing a trust.
What is a Cyprus International Trust?
Cyprus International Trusts have been used by families for decades since the current holder of assets (high net worth individual) transfers the assets (real estate, shares, cash, other) to a person or a company with clear instructions to hold the assets for the benefit of others. The creation of a trust is usually evidenced by a trust deed which will specify:
- What assets are transferred
- Who will manage the assets
- Who the beneficiaries are
- The rules or conditions that the trustee and beneficiaries must follow
Legal Ownership and Beneficial Ownership
For all intents and purposes of the law, the trustee will take possession of the trust assets and will hold them in its name. Nevertheless, the trustee is prohibited from benefiting in any way from the said assets. Accounting wise such assets are even not recorded in the statement of assets and liabilities of the trustee. On the other hand, the benefit resulting from any assets is attributed to the beneficiaries of the trust who hold the beneficial interest.
Requirements for establishing a Cyprus International Trust
For a Cyprus International Trust to be established the following requirements are to be met:
- The settlor must be of sound mind and of the right age.
- The settlor must not be a resident of Cyprus for at least 1 year prior to the establishment of the Cyprus International Trust.
- The beneficiaries must not be residents of Cyprus for at least 1 year prior to the establishment of the Cyprus International Trust.
- At least one trustee must be residing in Cyprus during the whole duration of the trust.
Other common law requirements:
- Certainty of Intention: The settlor (the person creating the trust) must intend to impose the obligations of trusteeship in respects to the trust assets for the benefit of the beneficiaries. In other words, a certain intention to obligate the trustee to hold the assets must be established and evidenced, preferably in writing.
- Certainy of Subject Matter: The trustee must have certainty as to the subject matter of the trust. Meaning that a clear designation of the trust property and the interests of the beneficiaries.
- Certainty of Object: Subject to the type of trust a list of the beneficiaries is to be drawn up.
The Cyprus International Trust Law, in accordance with Article 4A, affords settlors with powers ensuring that when exercised they will not affect the validity of the trust nor delay the execution of the trust. The settlor powers in question are:
- to revoke or amend the terms of a trust or any trusts or powers arising wholly or partly under it
- to advance, distribute, pay or otherwise apply income or capital of the trust property or to give directions for the making of such advancement, distribution, payment or application
- to exercise the powers of a director or officer or issue binding directions as to the appointment or removal of a director or officer of any company, wholly or partly owned by the trust;
- to give binding directions to the trustee in connection with the purchase, retention, sale, management, lending, pledging or charging of the trust property or the exercise of any powers or rights arising from such property;
- to appoint or remove any trustee, enforcer, protector or beneficiary;
- to appoint or remove any investment manager or investment adviser;
- to change the applicable law governing the trust or the forum for the administration of the trust;
- to restrict the exercise of any power or discretion of a trustee by requiring that they are only exercisable with the consent of the settlor or any other person expressly specified in the terms governing the trust.
Duration of the Cyprus International Trust
The Cyprus International Trust Law does not pose any limit on the period for which a trust continues to be valid. This was a significant amendment to the previous law which limited the duration of a trust to 100 years.
Charitable Trust and Purpose Trust
In accordance with Section 7, a Cyprus International Trust may be formed for one or more of the following purposes:
- the prevention or relief of poverty
- the advancement of education
- the advancement of religion
- the advancement of health or the saving of lives
- the advancement of citizenship or community development
- the advancement of the arts, culture, heritage or science
- the advancement of amateur sport
- the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
- the advancement of environmental protection or improvement
- the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantages
- the advancement of animal welfare and protection of animals;
- any other purpose beneficial to the public in general or which may reasonably be considered to be relevant to any of above
Confidentiality of Cyprus International Trust
The law includes specific confidentiality obligations over the trustee, the protector, enforcer or any other person to keep information and details of the trust confidential. This right is waived in the instances that law requires the disclosure of such information or if a judge before which a case is tried in issues a judgment to such effect.
The legally required public disclosures are considered further in this post.
Taxation of Cyprus International Trust
The income and profits derived within and outside of Cyprus are liable to every possible taxation imposed in Cyprus if the beneficiary is a resident of Cyprus in accordance with the Income Tax Laws of Cyprus.
If the beneficiaries are not Cyprus residents then any income and profit derived from Cypriot sources will be subject to tax.
Relevant to consider is what income is subject to taxation in Cyprus and the none domicile regime applicable in Cyprus.
Author - Photographer
For many years he has worked and devoted his skills and efforts towards building a successful career as a leading executive. From humble beginnings, his aim has always been to yield results; with a keen focus to attention to detail and client satisfaction. His experience has always been varied and not specific, at times he preferred it. With that in mind, he has dealt with CySEC on licensing and ongoing regulation, international private equity and credit fund managers, NASDAQ and NYSE listed companies occasional millionaires as well as self-made millionaires. His passion though is difficult transaction work organizing and deploying people for a common goal. Harris enjoys reading and studying the Cyprus law and sharing that information on this website.
Cyprus AML Law Translated to English in an announcement by CYSEC today the Cyprus AML Law has been translated to English up to law 81(I)/2019. The prevention and suppression of money laundering and terrorist financing laws of 2007 – 2019 is the backbone of the Cypriot efforts on terror