Cyprus: Business And Investment Opportunities in Cyprus - 18. International Trusts

Last Updated: 17 December 1999

18.1 The Law of Trusts in Cyprus

Cyprus has inherited its trust law from England so the doctrines of equity on which trust law is based have long formed part of the Cypriot legal system. In 1955, Cyprus enacted the Trustees Law, Cap. 193 and that was the basic structure that covered some of the principal aspects of the trust relationship. Thus, up to the date of independence in 1960, Cyprus trust law was to be found in its own domestic law and in the doctrine of equity and the case law in England. The strength of the English principles was reinforced by the enactment of section 29 of the Cyprus Court of Justice Law, 14 of 1960. In this legislation the civil and criminal courts were expressly instructed to adhere to the common law and equity principles, "save insofar as other provision has been or shall be made by any law and so long as not inconsistent with the Constitution". Indeed, in cases where Cypriot law has not made provision for a specific legal point, the courts of the island have held that reliance may be placed on common law or equity law.

18.2 The International Trusts Law 69 of 1992

In 1992 a Bill providing for the formation and administration of international trusts was enacted. By this Law, No. 69/92, which is called the "International Trusts Law", Cyprus modernised its existing legislation on trusts and now offers considerable incentives for the establishment of trusts in Cyprus.

The Law accords with the proclaimed government policy to enhance further the attractions of Cyprus as an international jurisdiction and the range of facilities offered to private and institutional clients.

It does not attempt to introduce a new comprehensive code to govern all aspects of trust law. Instead it builds on the existing law of trusts in Cyprus and offers to non residents the possibility of creating a trust which will have certain features that were not available previously.

The specific provisions of the new Law may be briefly summarised as follows:

18.2.1 Definition of an International Trust: An International Trust is defined as a trust in respect of which:

18.2.1.1 the settlor is not a permanent resident of Cyprus;

18.2.1.2 no beneficiary (other than a charity) is a permanent resident of Cyprus;

18.2.1.3 the trust property does not include any real property situated in Cyprus; and

18.2.1.4 at all times there is at least one trustee resident in Cyprus. Moreover, a trust will still qualify as an International Trust even if the settlor, the local trustee or a beneficiary (or any combination of those) is a Cyprus international company or partnership.

18.2.2 Validity: A Cyprus International Trust can be validly created by any non-resident who is of full age and sound mind under the law of his domicile, and no foreign law relating to inheritance or succession will invalidate the Cyprus Trust. Moreover the Trust will not be set aside by the settlor's creditors in the event of the settlor's bankruptcy or liquidation unless and to the extent that the creditors can show that the trust was made with intent to defraud them; the onus of proof will be on them. This provision effectively allows the use of Cyprus International Trusts as asset protection vehicles.

18.2.3 Irrevocability: An International Trust will be presumed to be irrevocable by the settlor or his lawful representatives unless a specific power of revocation is reserved in it.

18.2.4 Perpetuity period: An International Trust may remain in force for up to one hundred years notwithstanding any statutory provision of Cyprus or any other country to the contrary. This provision is considered to be very advantageous. The rule against perpetuities does not apply to purpose and charitable trusts.

18.2.5 Accumulation of income: The income of an International Trust can be accumulated for the whole of the perpetuity period.

18.2.6 Purpose Trusts: Trusts for a purpose, i.e. trusts which are not necessarily only for established charitable objects, or are for the benefit of ascertained individuals, such as to promote the understanding and cooperation between nations, are valid.

18.2.7 Authorised investments: The trustees of an International Trust have extensive investment powers which must be exercised with the prudence and diligence of the reasonable person.

18.2.8 Proper law of the trust: The law applicable to a Cyprus International Trust can be expressly changed to a foreign law provided that the new law recognises the validity of a trust and the respective interests of the beneficiaries; a trust established in a foreign jurisdiction may by its terms select Cyprus law provided that the foreign law itself recognises such a change. This provision ensures flexibility which might be important if a change in government fiscal or other policy makes it beneficial to change a trust's location.

18.2.9 Variation of trusts: The Cyprus courts have powers to vary the terms of a trust on the lines of the English Variation of Trusts Act, 1958. More specifically, the courts upon application may amend or repeal the terms of the trust or the powers of the trustees to manage the trust, if they are satisfied that the proposed arrangement will be in the interest of the person on whose behalf the application is made and will not substantially prejudice any other interested party.

18.2.10 Registration: International Trusts are exempt from the duty of registration under the provisions of any law. There is, however, a fixed stamp duty of CY£250 payable on the creation of a trust.

18.3 Confidentiality

Confidentiality and privacy of the constitution of International Trusts, as well as their transactions and activities, are assets which are highly prized. This aspect is a cornerstone of the new Law which ensures that a trustee or any other person, including officers of the Government and of the Central Bank of Cyprus, may not disclose to any person any information or documents in relation to:

18.3.1 the name of the settlor or any of the beneficiaries;

18.3.2 the consultations of a trustee regarding the exercise of his power, discretion or duties;

18.3.3 the reasoning for any specific exercise of power, discretion or duties or the elements supporting the reasoning;

18.3.4 the exercise of the power, discretion or duties of a trustee;

18.3.5 the accounts of an International Trust.

To the secrecy of the affairs of an International Trust there are only two exceptions:-

  • A trustee is under an obligation to disclose all documents and information relating to the accounts of the trust to a beneficiary, or all documents and information relating to a charitable trust to a charitable institution which appears to be a beneficiary in the trust instrument.
  • The courts, before which criminal or civil proceedings are pending, may order the disclosure of documents or information relating to an International Trust, if they are satisfied that such a disclosure is of substantial importance to the outcome of the pending proceedings.

The above non-disclosure provisions of the new International Trust Law are unique in that they entrench in an almost absolute manner the secrecy and confidentiality of a trust’s affairs.

18.4 Taxation

The income and profits of an International Trust derived or deemed to be derived from a source outside Cyprus are exempt from income tax or any other tax imposed in Cyprus such as capital gains, special contribution etc. The property of the trust is not subject to estate duty.

Trust income such as royalties, interest or dividends received from an international company is exempt from income tax in the hands of the trustees, and the beneficiaries of an International Trust are also exempt from the payment of income tax in respect of any monies they receive from the trustees.

Apart from the above-mentioned advantages, the following further benefits are available to Cyprus International Trusts:

18.4.1 An International Trust enjoys complete freedom from all exchange control provisions.

18.4.2 Most importantly, an International Trust may establish a Cyprus international company and thus take full advantage of the beneficial status of international companies as set out in section 9.

18.4.3 An International Trust may also establish a Cyprus international partnership, the profits of which are not taxable in the hands of the partners nor is tax payable by the partnership, or may register an international branch in Cyprus through a wholly or partly owned foreign company. The net profits of this international branch are either totally exempt from payment of tax where its management and control is outside Cyprus or are taxed at the rate of 4.25 per cent where its management and control is based in Cyprus.

18.4.4. An International Trust may be allowed to participate in local business and investments in accordance with the laws and regulations which govern investment in Cyprus by non-residents, but in such a case all income arising from local sources will be subject to the normal tax rates.

18.5 Conclusion

The advantages of using a trust for regulating family and commercial affairs are well known to those accustomed to the English common law. It appears that the trust concept is also becoming popular with people familiar with civil jurisdictions and it is expected that the use of trusts will increase in the future. Cyprus as an expanding international centre has shown that it may become a considerable trust jurisdiction. This is also due to the fact that a Cyprus trust may in certain cases be used to obtain the benefit of an applicable double taxation treaty or provide asset protection where this is required.

The purpose of this publication is to assist clients and associates in clarifying and appreciating the range of opportunities which are available in or through Cyprus. Although every effort has been made to provide the reader with a clear and comprehensive picture of the island's beneficial regime, it should be appreciated that is not possible to cover all aspects comprehensively in a publication of this size.

Individuals or companies who are seriously considering using Cyprus for any of their international business activities are advised to obtain expert professional advice before taking positive action.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.