Cyprus International Trusts are governed by Trustees Law, Cap.193 and the International Trusts Law No. 69 (I) 92. When a trust is established, a property is held by one party for the benefit of another. The party that creates the trust is called a ‘settlor’ and the party that the property is transferred into is called the ‘trustee’. The trustee holds the property for the benefit of the ‘beneficiaries’.
The Three Certainties
According to the well known British case Knight v Knight there must be three certainties for the creation of a valid Trust:
A. There must be a clear intention for the creation of a trust.
B. The subject matter (property) of the trust in question must be clearly identified.
C. The beneficiaries of the trust must be clearly identified.
Conditions for the Establishment of Cyprus International Trusts
For a Cyprus International Trust to be created the following conditions must be met:
1. The settlor must have not been a resident of Cyprus during the calendar year before the creation of the trust.
2. The beneficiaries of the trust must have have not been residents of Cyprus during the calendar year before the creation of the trust. There is an exception for charitable institutions.
3. At least one of the trustees must be a tax resident in Cyprus.
Cyprus International Trusts are often used by foreign citizens through the establishment of companies in Cyprus which are used to hold property in Cyprus or abroad. The settlor must be of full age and to be of sound mind.
A Cyprus International Trust is irrevocable unless it includes specific provisions for revocation.
Trusts must be registered with one of the authorities regulating the provision of trustee services. These authorities are the Cyprus Securities and Exchange Commission, the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus. The trust registries contain basic information about the trusts such as name of the trust and trustee, date of creation and date of termination.
Trusts are commonly used as an effective way of asset protection, especially to protect assets from potential claims of creditors. Any creditor that would like to claim that the trust was created with the purpose of defrauding creditors must file such Court claim within 2 years from the date that the property in question has been transferred to the trustee.
Trusts have numerous tax benefits as they are not subject to any tax in Cyprus if the beneficiaries are not residents in Cyprus and the trust does not include any immovable property in Cyprus.