CYPRUS INTERNATIONAL TRUSTS

A trust is an arrangement whereby property is managed by one person for the benefit of another. A Cyprus international Trust is a legal instrument created by a non-resident settler whereby his property is managed by a trustee for the benefit of non-resident beneficiaries. The law governing the administration of trust instruments in Cyprus International Trusts Law of 1955 as amended by the International Trust Law of 1992.

Criteria to establish a Cyprus International Trust

The settlor must not be a permanent resident of Cyprus
The beneficiary must not be a permanent resident of Cyprus
The Trust property does not include any real property situated in Cyprus
At least one trustee must be resident of Cyprus

Tax advantages of Cyprus International Trusts

The income and gains of an international trust derived from sources outside Cyprus is exempt from all kinds of taxes in Cyprus
Income, gains and profits are exempted from income tax, capital gains tax, special defence contribution or any other taxes
No estate duty or inheritance tax in Cyprus
Dividends, interest or other income received from a Cyprus international business company are free from taxes including withholding tax
Gains on the disposal of the trust’s assets are not subject to capital gains tax
Settlor is never deemed to be taxable on the trust’s income
Beneficiaries are never deemed to be taxable when income is not received

Other advantages

Irrevocable
Life duration – 100 years
Accumulation of income for the entire duration of the trust
No limitation on the kind of investments
Change of law permitted (if allowed by the trust deed)
Enforcability (By settlor or his personal representatives, by an individual designated in the Trust instrument – may also be the beneficiary)
Variation of the provisions of the Trust
No registering or reporting requirements
Confidentiality

Types of Trusts

Discretionary Trusts
- Grants the trustee discretion to pay the income or capital of a trust to any or all of a particular class of persons defined in the trust’s deed.
- May be given also discretion on the timing of the payment to any beneficiary
Fixed Trust

A fixed trust does not give the trustees any discretion when distributing the assets to the beneficiaries.
Settlor specifies exactly how the trust’s income and capital will be distributed.

Fixed and discretionary trust
- Combination of a fixed and a discretionary trust.
Example
- to distribute the income on discretionary basis but with fixed proportions the capital

to distribute the income to a specified person with discretion on the capital

Trading trust

trustee is a limited liability company with powers to carry on business
trust has trading functions to manage the business confidentiality achieved

Purpose trust

Is a type of trust which has no beneficiaries
Not to be confused with charitable trusts
They exist in order to advance some non-charitable purpose
Use an enforcer to oversee the trustees to ensure that the trust is administered as specified in the trust deed

Possible uses of a Cyprus International Trust

Income arising from overseas – beneficiary does not wish to remit to his own country
Divesting of personal assets – can be transferred to a C.I.T.
Investing in business overseas – profits and dividends received from the overseas business can be remitted to a C.I.T.
Investing through a holding company – a trust may be used in one country to hold an investment holding company in another
Migration – where an individual is planning to settle in a high-tax country, may set up a C.I.T. to place funds
Estate planning – for inheritance purposes where in his own country there are forced heirship laws
Asset protection – in cases of bankruptcy and liquidation can provide protection against creditors

the trust cannot be void or voidable the burden of proof lies with the creditors to prove that the trust was made with the intend to defraud the creditors
any claim must be made within 2 years of the transfer of the assets to the trust

Charitable purpose - in perpetuity

the 100 year limit does not apply
beneficiaries can be Cypriot residents