After 20 years from the introduction of the initial International Trust law, the long-awaited reform of the Cyprus International Trust (CIT) came into effect on 23 March 2012.
The law governing the CIT was enacted in 1992 ('The International Trust Law No.69(I)/92).
The most important changes introduced in the new law are summarized as follows:
1. Residency
The new amendments clearly state that the settlor and beneficiaries of the trust may not be a tax resident of Cyprus only in the year proceeding the year of creation of the trust.
It also removes the restriction on ownership of immovable property in Cyprus.
The original CIT law of 1992 contained three requirements to establishing an international trust, namely:
- The settlor was not be a permanent resident of Cyprus;
- The beneficiaries (with the exception of charities) were not permanent residents of Cyprus;
- The trust property did not include any immovable property situated within Cyprus;
- There had to be at least one Cyprus-resident trustee at all times.
The amendments allow now for the possible relocation of the beneficiaries and settlor to Cyprus. Vagueness of the 1992 law with regards to above was considered a serious drawback of the CIT.
2. Exclusion of overseas law
The amending law clarifies that:
- Any issues relating to the: validity, interpretation, amendment or administration of an international trust or a disposition to an international trust will be determined by the laws of Cyprus, without reference to the law of any other jurisdiction.
- Any inheritance or succession statutes in Cyprus or any other country, will not in any way affect the validity of an international trust or any transfer or disposition of property to it.
- No disposition to an international trust may be challenged on the basis that it is in breach of the laws of another jurisdiction for example: forced-heirship laws, mandatory provisions of family law or laws prohibiting or not recognizing the concept of trusts.
- The trustees' fiduciary powers and duties, as well as
powers and duties of any protector of the trust are governed
exclusively by Cyprus law.
3. Reserved powers and interests of Settlor
The provisions with regards to the powers and interests of the settlor, give him/her very similar flexibility as in the case of the Jersey and Guernsey law.
The amendment allows the settlor of a trust to act as
follows:
Retain a beneficial interest in trust property;
- Act as the protector or enforcer of the trust;
- The settlor may impose a general stipulation that the trustees' powers are exercisable only with the consent of the settlor or any other person specified in the terms of the trust;
- Reserve powers to himself / herself; These powers include:
- Revoking, varying or amending the terms of the trust.
- Applying any income or capital of the trust property.
- Acting as a director or officer of any corporation wholly or partly owned by the trust.
- Giving binding directions to the trustee in connection with the trust property
- Appointing or removing any trustee, enforcer, protector or beneficiary.
- Changing the governing law of the trust.
IMPORTANT NOTE: The Amendment provides that the reservation of any powers shall not be construed as "intent to defraud" the settlor's creditors.
4. Duration period of the trust
The 1992 law provided a restriction of a maximum of 100 years, which is now removed by the amending law.
The amendment provides that, unless otherwise specified in the terms of the trust, there will be no limit on the period for which a trust may continue to be valid and enforceable, and no rule against perpetuities or remoteness of vesting will apply to a trust or to any advancement, appointment, payment or application of property from a trust.
5. Investment Powers of the Trustee
The amendment gives trustees powers equal to the powers of an absolute owner, allowing them to invest in a broader range of investments for the best interests of the beneficiaries. It brings the trustees' investment powers into line with those of a trustees from the jurisdictions that follow the English Trustee Act 2000, such as Malta.
The amendment removes as well any doubt with regards to investing in Cyprus, clarifying that trustees can invest in movable and immovable property in both Cyprus and overseas (including shares in Cyprus companies).
6. Charitable institutions
The amendment specifies that an international trust can be considered a charitable institution if its main objective is to achieve one or more of the following purposes:
- Prevent or alleviate poverty.
- Promote education.
- Promote religion.
- Promote health or salvation of life.
- Promote the development of citizens and of the community.
- Promote art, culture, heritage or science.
- Promote amateur sports.
- Promote human rights.
- Dispute settlement or reconciliation or promote religious or national harmony or equality and individuality.
- Promote the protection or development of the environment.
- Relief needs arising from young or advanced age, ill health, disability, economic hardship or other disadvantage; promote the welfare and protection of animals.
- And for any other reason for the benefit of the general public or which is consistent with the above.
The above is in line with the England and Wales Charities Act 2006.
7. Confidentiality
Unless ordered by the Court of Cyprus, the trustee, protector or any governmental body is not entitled to disclose information or documents relating to the settlor, trustees, beneficiaries and/or property of the trust.
8. Application
The amendment has an effect with regards to all international trusts, regardless of the date of their formation and does not prejudice the validity of any prior valid disposition or transfer.
9. Public policy
The amendment establishes jurisdictional protection by providing that an international trust, which contains a choice of law clause in favour of Cyprus law, is fully protected from unfounded foreign judicial claims as a matter of public policy and order.
C. Savva Trustees is a member of the Savva & Associates (S&A) group of companies, and a leading provider of trustee services in Cyprus. Our highly specialized team of service professionals manages and supports the trust related needs of clients from
around the globe. We have extensive experience establishing and administering Cypriot International Trusts, used as:
- Employee Benefit Trusts
- Canadian Immigration Trusts
- Asset Protection Trusts
- Credit Shelter Trusts
- Charitable Trusts
- Life Insurance Trusts
In addition to providing the highest levels or professionalism and service, we are the most cost efficient tier-1 provider of Trust related services on the island. S&A offers the following basic fees:
|
Trust formation fee |
EUR 700 |
|
Bank introduction (optional) |
EUR 400 |
|
Government stamp duty (optional) |
EUR 450 |
|
Trustee services (corporate, per annum) |
EUR 800 |
|
Administration (Management, bookkeeping and financial administration of the trust (minimum fee) |
EUR 500 |
|
Withdrawal/termination fee charged in relation to the time cost incurred in arranging withdrawal, transfer and/or termination of the trust (minimum fee) |
EUR 800 |
|
Provision of protector (optional) |
EUR 200 |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
