Cyprus Law on International Trusts has been amended in 2012 making Cyprus one of the most competitive jurisdictions to set up such a Trust.
What is a Trust
The trust is an instrument where the person who creates the trust (the “Settlor”) appoints another person or persons (the “Trustees”) to hold property of the Settlor (the “Trust Property”) for the benefit of others (the “Beneficiaries”). Under such a deed, the Trustee becomes the legal owner of the Trust Property whereas the Beneficiaries become its equitable owners.
The trust can be created at a time where the Settlor is alive or on his death (for example through a testamentary disposition). In the latter scenario, inheritance laws are applicable. Here we are dealing only with Trusts created during the life of the Settlor.
What is a Cyprus International Trust (“CIT”)
For a Trust to qualify as a Cyprus International Trust (CIT), the following conditions must be satisfied:
• The Settlor (can either be a legal or natural person) must not be a permanent resident of Cyprus during the year preceding the creation of the Trust.
• At least one of the Trustees should be a permanent resident of Cyprus.
• The Beneficiaries (either legal or natural persons) must not be residents of Cyprus during the year preceding the creation of the Trust.
• There is a requirement of €430 to be paid as stamp duty as well as €30 for registration.
The CIT can be used for commercial or charitable purposes or to provide for one’s family. In its commercial form, a CIT can be used as an investment vehicle, to provide for employees’ pensions or other non-charitable purposes. In its family form, the CIT may be used to hold property for the benefit of others secretly, for minors and/or their successors. It can also be used to protect property against inheritors who may otherwise spend it or to protect property which has otherwise been apportioned to a married couple and their marriage has failed.
Uses and Benefits of the Cyprus International Trust
There are many uses and benefits in setting up a Cyprus International Trust:
Uses of the Cyprus International Trust
• A CIT can appoint nominee shareholders to hold shares in a company on behalf of the trust. In such cases, dividends, interest or royalties received by a CIT are not subject to withholding tax.