CYPRUS INTERNATIONAL TRUSTS AND TRUST SERVICES
Cyprus is a well-established international financial center with an excellent reputation and advantages for the establishment and management of international trust companies. Cyprus International Trusts (CIT) provide a high threshold of protection and flexibility for non-residents and attract high net worth private investors (HNWI) from around the world.
The reform of Cyprus International Trust Law, implemented in early 2012 (Law 20 (I)/ 2012), made Cyprus trust regime the most modern and favorable trust regime in Europe. Law 20 (I)/2012 was aimed at making CIT more practical, accessible and effective. The amendments provided for by this Law brought more certainty, clarity and stability to the regulation of the Trusts in Cyprus.
The combination of a high level of professional services and relatively low costs makes Cyprus the preferred jurisdiction for the EU Trusts for high net worth private investors and their families.
It is important that the final set of the benefits of a Cyprus registered Trust will depend on the residency and residence of its founders and beneficiaries.
General benefits of placing assets in a Cyprus International Trust include:
The Trust agreement is not a public document. Apart from that, neither the founder nor the beneficiaries will be the registered owners of any Trust assets, which will enable HNWI to protect its wealth with the strictest anonymity and confidentiality, and as a result, the Trust agreement can be considered strictly confidential.
Protection of the assets
A Trust is an effective way to protect assets from the creditors and potential plaintiffs as the founder ceases to own the settled assets, as well as from any claims based on non-recognition of the Trust, violation of the rules of the forced inheritance (see below), personal relations with the founder (for example, on the part of the husband or wife).
A Trust can be a powerful tool in planning a legal tax evasion, especially for those with the assets around the world.
Real estate planning
A Trust is a flexible way to ensure the continuity of the family wealth and, unlike a will, is not a public document.
Freedom of choice
A Trust can provide the transfer of wealth in a manner that might not otherwise be acceptable, and to the individuals in some countries who might not otherwise be eligible.
Reduced political risk
If the trustee and the assets are in a stable jurisdiction, the Trust can provide protection against the nationalization or seizure of the assets.
The legislative framework
The legal framework governing the establishment of CIT is based on the Trustee Law, chapter 193, which is largely consistent with the British Trustee Act dated 1925 and the International Trusts Law 69 (I)/92 as amended in 2012 (Act 20 (I)/2012). Equity and Case Law also apply to Trusts.
The most important features related to the legal framework and legal protection of CIT property can be summarized as follows:
- Succession Laws do not affect the validity of the transfer of the assets to CIT as their transfer occurs during the life of the founder.
- The assets listed in CIT are protected from potential claims. Subsequent bankruptcy or liquidation of the founder or actions of the creditor against the founder, regardless of whether the Trust was created without consideration or in the interests of the founder or his/her spouse or children, unless it can be proven that the CIT was established with the intention of the founder to defraud its creditors. The deadline for filing a statement of claim in the courts of Cyprus regarding the assets transferred by the founder to CIT is limited to 2 years from the date of such transfer.
- The trustee can invest Trust funds in any type of investment. The income is accumulated over the entire indefinite period without compulsory distribution.
- The law imposes on the trustee, the defender, the executor or any other interested person a duty to maintain confidentiality regarding the identity of the founder or any beneficiary, accounts and assets of the Trust, etc. Such information can only be disclosed by the order of a court under any civil or criminal proceedings if the court is convinced that it is material for the fair settlement of the proceedings relating to the property of the Trust or the parties of the Trust.
- A foreign judgment concerning any CIT issue is not enforceable in Cyprus.
- The Amendment Act 20 (I)/2012 introduced a uniform tax regime applicable to all the persons based on the tax residency test. CIT income and profits that are derived or believed to be derived from the sources in Cyprus and abroad are subject to taxation in all the forms established in Cyprus in the event that the beneficiary is a resident of Cyprus. In the event that the beneficiary is not a resident of Cyprus, only the income and profits earned in Cyprus are subject to taxation in accordance with Cyprus tax legislation.
Choice of the jurisdiction for an International Trust. Why Cyprus?
When choosing the jurisdiction to establish an International Trust, an individual should consider a jurisdiction that has the following characteristics:
- Favorable legal framework and the existence of the specific Trust Law;
- Effective taxation of Trusts;
- Cost effective Trust formation and qualified Trust service providers;
- Political and economic stability;
- Absence of the exchange control.
Cyprus is the ideal jurisdiction for International Trusts. Here is a short list of the reasons why the establishment of an International Trust in Cyprus is beneficial for its owners:
- Cyprus legislation governing International Trusts is based on the principals of British private law.
- Cyprus has been a full member of the European Union since 2004, which contributes to a stable economic, political and business environment.
- The custody of the assets of the Trust is carried out in reliable depositories.
- There is no inheritance tax in Cyprus.
- Absence of the exchange control.
- No reporting requirements for the International Trusts.
- Cyprus belongs to the economical Trust jurisdiction with easy access and no language barriers.
- Availability of competent and experienced professionals to create and manage Trust structures.
Conditions for creating a valid Trust
According to the law, the following conditions must be met in order to establish a Cyprus International Trust:
1. The founder, whether an individual or a legal entity, must not be a resident of Cyprus during the calendar year preceding the year of the establishment of the Trust;
2. The beneficiary(s), whether an individual or a legal entity, other than a charitable organization, must not be a resident of Cyprus during the calendar year preceding the year of the establishment of the Trust;
3. At least one of the trustees of the Trust must be the tax resident in Cyprus for the entire duration of the Trust.
A Trust may appoint an advocate, a person other than the trustee, who may be granted the powers of any nature by virtue of the Power of Attorney, including the right to “veto” the decisions of the trustee, and the right to appoint or revoke the appointment of the trustee.
In addition, the following criteria must be met to create a valid Trust:
- The founder must be of legal age and legal capacity (of the sound mind).
The following three confidences should take place:
Confidence of the intent: evidence of the express intent of the founder to establish the Trust.
This is usually evidenced by a Trust instrument. Verification of the intention is based on the words used and the behavior of the parties; there is a clear intention to transfer the property into the Trust in favor of the third party. Care should be taken in the choice of the words because preliminary words, that is the words of simple hope and desire (e.g., “in the hope that”, “I would like this”, etc.), are not enough to create the Trust.
- Confidence of the subject: this means that the assets of the Trust must be easily identifiable, otherwise the Trust is invalid due to the uncertainty, i.e. it can be cash in a bank, shares or other movable property, real estate, etc.
- Confidence of the objects: the identity of the beneficiaries of the Trust must or can be established at the time of the creation of the Trust. The beneficiaries can be a specific class of the beneficiaries representing a specific group of people (i.e. family, company, etc.). Therefore, it’s not necessary for each beneficiary or potential beneficiary to be identified by the trustee.
- Confidence of the intent: evidence of the express intent of the founder to establish the Trust.
Trust management services offered by Amazon Corporate&Immigration Services:
Amazon Corporate&Immigration Services is a leading provider of the Trust management services in Cyprus with extensive experience in the establishing and managing Cyprus International Trusts.
We provide a high level of service and take care of every detail. We provide you with the following services:
- Drafting individual Trust management agreements that meet the goals of our customers;
- Collection and distribution of the dividend income;
- Maintaining accurate records to keep track of the amount of the debt and income;
- Providing custody services to Cyprus International Trusts through our network of professionals;
- Preparation of clear and understandable statements;
- Compliance with the tax laws and regulations by filing tax returns and providing tax information to the principal, beneficiaries and others;
- Professional and responsible attitude to the needs of the beneficiaries;
- Compliance with all the banking rules;
- Providing comprehensive insurance coverage for the clients.
Amazon Corporate&Immigration Services team of professionals can advise you on the creation of a Cyprus international Trust, tailored to your specific business and personal needs.