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LEGISLATION

  • International Trust Law 69(I) 1992 as amended by Law 20 (I) 2012; and
  • The Trustee Law Cap 193 which has been adopted by the United Kingdom Trustee Act of 1925.

DEFINITION OF A TRUST

The definition of “Trust” has been developed by the Cypriot case law.

“A trust is a legal relationship created by a settler where assets are placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose. The trust can be created during the lifetime of the Settlor or on death of the Settlor. The terms of the trust are usually set out in a written instrument, such as a deed”

CHARACTERISTICS OF A TRUST

  • Trust assets are separate from the assets of the trustee.
  • The Trustee holds the legal title to the trustee assets, or assets are held in the name of another person on behalf of the trustee.
  • The Trustee is authorized and holds the duty to manage the assets of the Trust in accordance with the terms of the trust and the law. Failure of the trustee to fulfil his duties under the trust may incur personal liability.
  • The Settlor may reserve certain rights and powers or a trustee may himself be a Beneficiary. Such cases do not necessarily affect the validity of the trust.

THE INTERNATIONAL TRUST IN CYPRUS

According to the International Trust Law a Cyprus International Trust must comply with the following requirements: -

  1. The Settlor is either a natural or legal person that is not a resident of the Republic of Cyprus during the calendar year prior to the creation of the trust.
  2. At least one of the Trustees should be a resident of the Republic of Cyprus during the whole duration of the trust;
  3. No beneficiary, whether a natural or legal person, other than a charitable institution is a resident of the Republic of Cyprus during the calendar year prior to the creation of the Trust.

WHAT IS A VALID TRUST

As per the Cypriot Law, a trust is valid whether the following certainties are meet:-

  1. Certainty of Intention to create the trust. At this point and in order to establish that this certainty exists, you need to provide evidence which showing the express intention of the Settlor to create the Trust, such us a trust instrument.
  2. Certainty of subject matter. The assets that are become the Trust property must be identified (such us money, immovable property and shares)
  3. Certainty of beneficiaries: The identity of all the intended Beneficiaries of the trust must be ascertained or ascertainable when the Trust comes into existence, if not the Trust will fail.

TAX BENEFITS

  • There is no estate duty or inheritance tax in Cyprus.
  • Income, gains and profits sourced from outside Cyprus are exempt from income tax, capital gains tax, the special defence contribution or any other tax in the Republic at the time of writing. These are only taxable in case where the beneficiary is a tax resident in Cyprus. In case where the beneficiaries are not tax residents in Cyprus, they are taxed only on income sourced from within the Republic of Cyprus.
  • Dividends, interests or royalties received by a Cyprus International Trust from a Cyprus Company are not taxable and not subject to any withholding tax/

CONFIDENTIALITY

  • The registration of the Cyprus International Trust in the Trust Registry is mandatory. The trust Register is not available to the public, but it is available for inspection by the competent authorities.
  • The Trustees owe a duty of confidentiality to their beneficiaries and are not at liberty to disclose information or documents unless they are ordered to do so by a Cypriot Court or such disclosure is permitted by law in specific circumstances.

ASSET PROTECTION

  • The Cyprus International trust can be utilized to shield assets against claims arising in tort or contract as a result of transactions entered into by the previous owner of the Trust property.
  • Upon the creation and registration of the trust, the client is able to protect his assets against expropriation or other potential claims brought against him by governments or creditors.
  • The creation and registration of a trust is also recommended for high net worth individuals to shield property from their spouses or former spouses.
  • The transfer of the property to the Trustee can only be set aside by a court, provided the latter is satisfied that a creditor of a previous owner of the Trust property has been defrauded. The onus is on the creditor to prove that he has been defrauded by the transfer of the property to the trustee.

OTHER BENEFITS

  • The limitation period to challenging a trust is only two years
  • No exchange control regulations apply.

WHERE YOU CAN USE A CYPRUS INTERNATIONAL TRUST

  • CONTROLLING FAMILY FINANCES
    • Clients may use the Cyprus international trust to preserve their family fortune for their descendants. The Trust will prevent family members from having direct access to their share of the trust.
    • The Cyprus International Trust is a means of high net worth individuals with unconventional family circumstances to provide for family members or blood relatives such us ex-wife and children from previous marriages or children conceived outside of wedlock.
    • A minor may be unable to hold property in his own name. the Cyprus International Trust allows the minor to benefit from the property via a Trustee who holds and manages the property until he reaches adulthood and is able to hold the property in his own name.

JURISDICTION & CHOICE OF THE LAW

JURISDICTION

  • As per the section 12B of the International Trust Law, it is clearly mentions that in relation to the Cyprus International Trust are determined before the Cypriot Courts in accordance with the Laws and regulations of the Republic of Cyprus without reference to the law of any other jurisdiction. This protects the Cyprus International Trust from the application of foreign laws and provides additional control and security.
  • The law regulating a Cyprus International Trust may be changed to the laws and regulations of another jurisdiction under the section 12D of the International Trust Law.

CHOICE OF LAW

  • The choice of law provisions under section 3 (1A) of the International Trusts Law, clarify that a choice of Cypriot law to govern the Cyprus International Trust is valid and effective. The choice of law provisions also establish rules by which the governing law of the trust can be ascertained in the absence of choice.
The content of this article intends to provide an overview of the subject matter. Specialist advice should be sought on each particular case. Our expertise can provide any legal information related to the above. For more information please contact us at info@azgroups.net
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