Most of individuals are not familiar with the trust concept and they are concerning about making a trust and transferring ownership of their properties to a Trustee. If the trust is governed by sound law enforced in a reputable jurisdiction and if you properly understood the distinction between legal and beneficial ownership, all the concerns you may have can be alleviated. You can save substantial amount in income tax and capital gains tax if a properly structured and administered trust created.
A trust can be defined as a legally binding arrangement where the Trustee is taking title to the trust assets by the Settlor who is the person who transfers assets to the Trustee. The Trustee holds the assets and protects them for the benefit of the Beneficiaries (who may include the Settlor) or for a specific purpose. The trustee’s interest in the property or assets appears to be one of complete ownership and possession, but the trustee does not have the right to receive any benefits from those assets.
Other than a Trustee, a Protector can be appointed who will have the power to veto the decisions of the Trustee and also to appoint or cancel the appointment of the Trustee.
For a variety of tax planning purposes Cyprus attacks people who wish to set up a Cyprus International Trust.
Criteria to establish a Cyprus International Trust under International Trust Law of 1992:
- The settlor, where a physical or legal person, must not be a permanent resident of Cyprus in the year preceding the formation of the trust
- At least one trustee must be a permanent resident of Cyprus at all times
- None of the Beneficiaries (other than a charitable institution), either legal or physical persons, must not be a permanent residents of Cyprus in the year preceding the formation of the trust.
It is now required that all Trusts be registered and the register of trusts containing the following information:
- Name of Trust
- Name and Address of the Trustee(s)
- Date of creation of the Trust
- Date of termination of the Trust
There is no requirement to register or publish the financial results of the Cyprus International Trust and the Deed of Trust is private to the parties concerned. The settlor, trustee, protector and beneficiaries should not disclose any information to third parties relating to the Trust unless a Cyprus Court orders the information to be disclosed.
Benefits of a Cyprus International Trust:
- Inheritance planning and avoidance of forced heirship rules,
- Protection of assets (safeguard the interest of a beneficiary) and wealth for future security, from business failure, from future claims of Governments, law suits or international blocking or freezing regulations overseas
- Tax planning and optimization; the income and gains tax of an International trust derived from sources outside Cyprus is exempt from all kinds of tax in Cyprus and no Cyprus estate duty is chargeable in respect of assets belonging to a Cyprus International Trust. Also under a proper tax structure, the settlor (residing in high taxation jurisdiction) will be able to take advantage of the beneficial double taxation treaty network of Cyprus and the non-taxability of any income of the trust in Cyprus and/or to minimize his taxation on income or wealth, by transferring property or arrange for such income to be directed to a Cyprus International Trust
- Confidentiality; trust may hold shares of Cyprus Company with Cypriot nominees
- Exclusive jurisdiction of Cyprus Courts
Our expertise team can advice you on all aspects of Trusts and draft a Cyprus International Trust tailored to your business and personal needs. Please contact us today for further guidance and assistance.