I am a lawyer who specializes in professional trust services in Cyprus. What does that entail and why Cyprus?
- CYPRUS TRUSTS
A Trust is the legal relationship created when a person (the “Settlor”) places assets under the legal ownership and control of another person (the “Trustee”) for the benefit of other persons (the “Beneficiaries”).
The Cyprus International Trust (“CIT”) is an arrangement governed by the International Trusts Law of 1992 as amended (the “Law”), a solid and tested law based on UK law and equity principles, which has now increased and has more reinforced dynamics following a major revamp in 2012. Incidentally, all professional trust service providers are fully regulated in Cyprus.
- BENEFITS OF A CIT
The main benefits of CITs include but are not limited to:
Asset protection is of paramount importance. Generally speaking, asset protection involves the placement of one’s assets in a legal, practical and efficient manner, beyond the reach of future creditors or other claimants, ultimately protecting them from potential misuse, claims and other vulnerabilities, including forced heirship or matrimonial rules.
One of the strongest aspects that differentiates CITs from many other international trusts is that of asset protection.
Specifically, the Law provides that, notwithstanding any laws of Cyprus or any other country, the CIT shall not be void or voidable and no claim may be made whatsoever with respect to the transferred assets in the event of the settlor’s bankruptcy, liquidation etc.
A limited period of time (two years) is provided for a creditor to challenge the trust. The burden of proof rests with the creditor who has to prove that the trust was created by the settlor with the intent to defraud.
The Law also provides that no disposition of property to such trust shall be affected by the applicable laws of any jurisdiction.
CITs are often identified as a ‘firewall’ for all their underlying assets
Asset preservation for future generations
CITs are a way of preserving or even expanding wealth so that future generations can benefit without taking advantage or misuse the assets involved. The trustees, via a suitable drafted trust instrument, customized on a case by case basis, may regulate the way assets are used and to what extent and under what conditions they can be distributed to beneficiaries.
Avoidance of Succession Laws/Forced Heirship Rules
Many countries have forced heirship rules that do not allow for an individual to decide the way his/her assets are to be distributed and to whom. The Law, on the other hand, contains provisions that the inheritance law of the Republic of Cyprus or of any other country shall in no way affect any transfer of disposition made to a CIT and the validity of such transfer shall not be challenged.
Where a beneficiary or even the settlor becomes incapacitated, the trustees can financially support them and take care of their various needs, as provided for in the trust instrument.
CITs can be a dynamic tax planning tool.
Upon the creation of a CIT, the settlor and beneficiaries must not be tax residents of Cyprus during the calendar year immediately preceding the creation of the trust. But what is such person wants to move to Cyprus?
After the revamp of the Law, such persons can now become Cyprus tax residents without compromising the validity of the CIT. They are automatically considered to be ‘non-domicile’ for Cyprus tax purposes, thus being tax exempt from dividends, interest and gains from sale of shares. With proper planning, the income of a CIT can be completely tax exempt
The attractive legal framework governing CITs, the favorable tax and corporate regimes as well as the comparatively cost competitive advantage that Cyprus has, constitutes Cyprus as a preferred, prime jurisdiction for foreign business people and high net worth individuals.
The purpose of this legal briefing is to provide a general guideline on the subject and not to be considered, in any way, as legal advice. It is advisable to seek professional and legal advice on this subject before proceeding with any general information provided to you. For further clarifications and advice, please contact me at firstname.lastname@example.org.
Director / Head of Trust Dept.
Totalserve Trustees Limited
Gr. Xenopoulou Street 3106
PO Box 54425
Telephone : +357 25866000
Fax :+357 25866001
Email : email@example.com