- November 9, 2018
- Posted by: Panos
- Category: Fiduciary, Immigration, International Trust, Investments, Trust
The Cyprus International Trust (CIT) Law of 1992, was amended in March 2012 to provide a firm legislation for the “planning of asset protection”, positioning Cyprus as one of the most attractive countries for asset protection. In September 2013, the CIT Law was further amended following the regulation of regulated trustee services in Cyprus solidifying as such the island’s position as a leading Trusts jurisdiction.
The main parts of a Trust include the founder (the Settlor), who provides the assets for the benefit of a third party (the Beneficiary/ies) under the control of another person (the Trustee).
Trust Formation: To set up a Trust, a Trust Deed is required to be drafted and signed by the Settlor and the Trustee, setting out the conditions under which the Trust Property will be transferred, held and ultimately administered by the Trustee. Three certainties must hold for a valid Trust: the certainty of intention, the certainty of subject matter, and the certainty of objects.
- The Settlor is not a permanent Cyprus Tax Resident during the calendar year which precedes the year of creation of the Trust. They can either be a physical person, or a Cypriot or an international entity;
- At least one of the Trustees is a Cyprus Tax Resident and has a license;
- None of the Beneficiaries, whether physical or legal person(s), are a Cyprus Tax Resident during the calendar year which precedes the year of creation of the Trust; and
- Property that is the subject of Trust can include any movable or immovable property abroad and/ or in the Republic of Cyprus, as well as shares of Companies based in Cyprus.
Benefits of a Cyprus International Trust
The Tax benefits of a Trust are many, making it an efficient tax planning vehicle.
CITs are treated as tax transparent and are not subject to any form of Cyprus tax, provided the Beneficiary/ies are not Cyprus Tax Residents and the Trust does not own or is disposing of any immovable property situated in Cyprus. Where the Beneficiary/ies are Cyprus Tax Residents, any income earned or deemed to be earned from sources within Cyprus, is subject to Cyprus income tax. With respect to non-Tax Resident Beneficiaries, only Cyprus-sourced income is subject to taxation in Cyprus. It is important to note that where the Beneficiaries of the CIT are subject to Cyprus tax, it is the Trustee’s duty pursuant to the Law, to ensure that any taxes are paid.
- No formal registration is required. The formation cost is very reasonable;
- An International Trust is irrevocable unless a specific provision to the contrary is put in place during the creation of the Trust;
- There is no restriction on the type of investments and assets which can be included under the International Trust;
- The income is accumulated for the entire period with no forced distributions;
- Avoidance of forced heirship rules: Trusts are valid and enforced either by the Settlor, their authorised representative (the Trustee), or the person designated in the Trust with the right to impose (this may be the Owner);
- If warranted by the terms of the Trust, the CIT can be transferred to another jurisdiction;
- Asset protection: the CIT is not affected if its Settlor goes bankrupt, except if the purpose of the transfer of assets to the Trust was to mislead the creditors of the Settlor;
- Confidentiality: a CIT affords a high threshold of protection in the matters governed by the Trust Deed, including the identity of the Beneficiary/ies. Anonymity of ownership of a Company can be accomplished if its shares are transferred to a discretionary Trust. There is no disclosure of the Trust’s financial information;
- A person, through a Trust, may designate the persons who will inherit him, which otherwise due to the law of the country may not be able to inherit.
In summary, a CIT offers sound asset protection to the highest degree due to the transparency and alignment with all EU and local anti-money laundering laws and regulations, combined with the certainty of its operation by Cyprus law and the simplicity of its formation.