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Cyprus International Trusts: Modernized and Reborn

G. Polemidiotis & Co LLC > News > Cyprus International Trusts: Modernized and Reborn

Cyprus International Trusts (“CIT’s”) have evolved considerably since 1992 when they were formally introduced in Cyprus legislation. The 1992 Law was not a self-contained law but it built on the 1955 Trustees Law, Cap.193 which is almost identical to the English Trustees Act of 1925.
 In March 2012, the Ministry of Councils passed a long-overdue amendment to the 1992 CIT Law, which made CIT’s more flexible and attractive to foreign investors. The salient advantages of CIT’s such as confidentiality, asset protection and avoidance of forced heirships were significantly enhanced causing a surge of interest by foreign investors for the establishment of CIT’s. In September 2013, the CIT Law was further amended to provide for the creation of a trust register to be maintained by the authorities supervising the providers of trustee services. This latest development has been welcomed by the trustee services community as it solidifies Cyprus’ position as a leading trusts jurisdiction.

In general terms, a Trust is a settlement whereby the Settlor, transfers property to an independent person, the Trustee, for the latter to hold for the benefit of the Beneficiary/ies. While trusts have originally been utilised to plan and preserve family wealth, in recent years and in Cyprus particularly, the tax regime applicable to trusts has transformed them into tax planning vehicles.
The most important advantages of CIT’s are the following:

  • Avoidance of forced heirship rules: Succession laws do not affect the validity of the transfer made to the CIT, as the transfer takes place during the life time of the Settlor.
  • Asset protection: The assets settled into the CIT are sheltered against potential claims. Subsequent bankruptcy or liquidation of the Settlor or Creditor’s action against the Settlor –irrespectively of whether the trust was set up without consideration or to the benefit of the Settlor or his/her wife or children unless it can be proven that the CIT was set up with intention of the Settlor to defraud his creditors. There is a 2-year time limit from the date of transfer of trust property in the CIT to file such an action with the Cyprus Courts.
  • Wide Investment capabilities: The Trustee is able to invest trust funds in any kind of investment. The income is accumulated for the whole perpetuity period with no forced distributions.
  • Confidentiality: A CIT affords a high threshold of protection of the matters governed by the Trust Deed, including the identity of the Beneficiary/ies. In the absence of a court order, the Trustee, the Protector or any other person cannot disclose to any person any documents or information, related to the Trustees or to the Beneficiaries referring to the exercise of the powers of the Trustees or related to the CIT. Moreover, where Cyprus law is chosen it is exclusively applicable over the CIT and any matters for the validity, interpretation or result of any trust the validity of any transfer or disposition of property in a trust, the administration of the CIT in Cyprus or abroad are decided by exclusive reference and application of the Cyprus law.
  • Exclusive jurisdiction of the Cyprus courts: A foreign judgement dealing with any issues of a CIT is not enforceable in Cyprus.
  • Significant tax benefits:
  • CIT’s are treated as tax transparent, hence not subject to any forms of Cyprus tax provided the beneficiary(ies) are not Cyprus residents, and the Trust does now own/dispose immovable property situated in Cyprus;
  • No tax on distributions to beneficiaries.

The simplicity of establishing a CIT combined with the certainty of its operation by Cyprus law renders the CIT one of the most sought-out wealth management tools worldwide. Through the latest amendments to the CIT Law, Cyprus has achieved transparency and alignment with all EU and local anti-money laundering laws and regulations, while maintaining a legal system that offers asset protection to the highest degree.

Our team of highly experienced professionals can advise you on establishing a Cyprus International Trust, tailored to your specific business and personal circumstances. Please contact Mr. Charles Savva on c.savva@savvacyprus.com to discuss how we can be of assistance to you.

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