The 2012 amendments to the International Trusts Law 69(I)/92 have made Cyprus an appealing jurisdiction for setting up International Trusts. A trust is a legal arrangement wherein the settlor, who is the owner of the asset, transfers the title to the asset to another person, the trustee. The trustee is then obliged to manage the asset on behalf of the beneficiary, a person named by the settlor as the one to receive the benefit of the trust.
For a trust to qualify as “International” under Cypriot law, the settlor and beneficiary must not be residents of Cyprus, but at least one of the appointed trustees should be. Placing the asset in a trust protects it from claims by creditors, former spouses, governmental bodies against the settlor, and from legal claims arising from tort or contractual proceedings.
The benefits of this legal arrangement vary for each participant. For instance, once the settlor places the asset in trust, the ownership obligations imposed on the settlor cease to exist. However, when setting up the trust, they can decide who will manage the asset, how it will be managed, and who will benefit from the trust. It goes without saying that the beneficiary enjoys the benefit of the asset without the management or ownership obligations. For the trustee, the main benefit is receiving payment for their services.
The primary advantage of establishing a trust in Cyprus is the country’s tax laws. Firstly, foreign profits are exempt from taxes in Cyprus. Additionally, profits are taxable only if the beneficiary is a Cypriot resident, and in an International trust arrangement, the beneficiary is always a non-resident. Dividends from the trust are not subject to tax, and Cyprus does not impose an inheritance tax.Another significant benefit is that, under Cypriot law, the trustee must report to the beneficiary and comply with several transparency and reporting obligations. Moreover, although the trust is registered in the trust registry, the beneficiary’s identity is not revealed, and providing information on the deed is not obligatory.
In conclusion, considering the tax exemptions and the monitoring obligations imposed on the trustee, Cyprus offers a safe and transparent legal hub for a settlor to set up a trust in an economical and secure manner.
At Christy’s, our team can guide you through the legal steps of setting up a trust in Cyprus.
