CYPRUS INTERNATIONAL TRUST LAWYERS

We have considerable experience in forming and providing trustee services to Cyprus International Trusts.

For settlors residing in high taxation jurisdictions, it is possible to minimize their taxation on income or wealth by transferring property (assets include, inter alia, movable and immovable property, shares or cash) anywhere in the world to a Cyprus International Trust, as under a proper tax structure they will be able to take advantage of the beneficial double taxation treaty network of Cyprus.

Furthermore, confidentiality is achieved, as there is no requirement to register or publish the financial results of an International Trust. The Deed of Trust is private to the parties concerned whereas in many overseas jurisdictions, when a person dies his will becomes open to public inspection.

Benefits for establishing a Cyprus International Trust:

1. Trusts and beneficiaries of trusts are not taxed in Cyprus.
2. No Capital Gains tax is paid by the International Trusts.
3. Distributions to beneficiaries are not subject to tax in Cyprus.
4. Assets can be added to the trust at any time.
5. The trust can be a shareholder in a Cyprus Company or a foreign company.

If the Cyprus Trust is a shareholder in a Cyprus Company it will enjoy the tax and other benefits of the Cyprus international company.

Trust assets are permanently separated from the Settler’s personally owned assets.

The trust can be revocable or irrevocable;

Discretionary Trust

Under a Discretionary Trust, the Trustees have the discretion to deal with the trust property as they think proper for the benefit of the beneficiaries. Such a trust is the most commonly used as it enjoys many advantages, such as:

• The Beneficiaries cannot be taxed on the trust fund because they have no legal right in the trust fund until the trustees exercise their discretion to distribute the trust fund to them.
• The Beneficiaries only have contingent interest in the Trust property and as such the trust assets are not available to any creditors if they go bankrupt.
• The Trust Deed created is a flexible instrument allowing Trustees to vary the various interests under the Trust when circumstances change, without the need to have recourse to the procedure of variation of the trusts requiring consent of all beneficiaries or seek court action to vary the terms of the Trust.

Fixed Trust

Under a Fixed Trust, the Trustees are obliged to follow the terms of the Trust Deed. As such they do not have any discretion when distributing assets to the Beneficiaries.

Trading Trust

Under a Trading Trust, the Trustee is usually a company which has the power to trade. The advantage is that third parties are not aware of the existence of the Trust as all documentation is used are in the name of the Trustee company.

Purpose Trust or Accumulation and Maintenance Trust

Under such a Trust, the income and capital are accumulated and distributed when infant children attain certain age or a future event (for example, marriage) takes place as provided by the Trust Deed.

Taxation

Section 12(1) of the Law provides that the income and the gains of an international trust derived or deemed to be derived from sources outside of Cyprus shall be exempt from all tax imposed in Cyprus and no estate duty or inheritance tax shall be chargeable in respect of assets belonging to an international trust.

Therefore there is total exception from income tax, capital gains tax, special contribution tax or any other taxes in Cyprus. Also, interest deriving from trust funds vested in any type of Cyprus bank account is also tax exempt.

It should be noted that the wording of the section is such that the trust is liable to taxation in Cyprus (though its foreign income is taxed at zero rate), thus preserving the possibility of arguing that it is a resident for the purpose of the various tax treaties.

Although taxation considerations relating to Trusts are fairly complicated, the following are indicative advantages.

Our Services
We have considerable experience in forming and providing trustee services to Cyprus International Trusts.