A Trust is an equitable obligation, binding a person, called the trustee, to administer the property which is transferred to him by the settlor for the benefit of a person, called the beneficiary, based on the oral or written wishes of the settlor, which are expressed in the trust deed or will.
The trustees are appointed by the settlor and can be legal entities or physical persons.
The Law defines an international trust as follows: the settlor and beneficiaries must be Republic of Cyprus non-residents during the last year, preceding the formation of the Trust.
Cyprus is a prominent fiscal international centre which provides attractive opportunities for establishing and operating a Trust.
The legal framework is a combination of different pieces of English law, based on the principles of equity and trust. This makes it one of the most attractive legal Trust frameworks in the world, as it allows for the creation of a Trust that will meet the most complex and demanding of situations. Such a Trust is called a Cyprus International Trust (CIT).
The Use of Cyprus International Trusts
CITs are widely used in 'family situations' but also, for business transactions and as a vehicle for charitable and other purposes. Some of the reasons for why a CIT may be created, include:
- To hold property for minors or successive generations of a family;
- To provide for a couple on their marriage, whilst ensuring that the property is 'protected' in the event of the marriage failing;
- As an investment vehicle.
Requirements for the Creation of a Valid CIT
To meet the requirements of a CIT, the settlor and beneficiaries must not have been tax resident in Cyprus during the preceding year.
- The Law regulating a CIT, may be changed to another foreign law;
- All matters regarding a CIT are determined by Cyprus Law and the Cyprus courts have full jurisdiction;
- In the event of fraud, a CIT can only be challenged by creditors, within two years of the date that the fraud took place.
The CIT has undergone major reform with a new Law being introduced in early 2012 (Law20(I)/2012, which amended the 1992 Law). A number of people believe that this has transformed the Cyprus trust regime into the most favourable trust regime in Europe. The new legislation was aimed to make CITs more effective, as it is founded on much greater certainty and stability.
This new Trust Law offers the opportunity for non-residents to create Trusts in Cyprus.
On 23 February 2021, Cyprus fully implemented the provisions of the 5th Anti-Money Laundering EU Directive 2018/843, into its domestic legislation. This has seen implementation of the establishment of central registers of ultimate beneficial owners ('UBOs'), with one of these being the Register of Beneficial Owners.
Under the amendments and implementation of the Register of Beneficial Owners, there is a requirement for Trusts to register the details of the trustee, settlor, protector, and beneficiaries of the trust:
- Name and surname and the name of their father;
- Date and place of birth;
- Nationality or nationalities;
- Residential address;
- Number, type and country of issue of identification document;
- Date of death (where applicable);
- Date on which the UBO, became the beneficial owner;
- The nature and extent of the rights which are directly or indirectly held by the beneficial owner;
- The role of the beneficial owner within the trust;
- Any other information and/or supporting documentation requested by Cyprus Securities and Exchange Commission ('CySEC') for identification purposes;
- Where the Trust has classes of beneficiaries; CySEC requires a description of the classes, the members of each class and the nature and extent of the rights that each class of beneficiaries has.
- We advise clients regarding the creation of a CIT, including proposing structure ideas for creating and operating the CIT;
- We draft all of the required legal documents;
- We establish private trustee companies (PTCs) in Cyprus and in other jurisdictions;
- We advise clients and trustees about issues arising in relation to a CIT, for example; trustee powers, beneficiary rights and interpretation of the trust deeds.
Dixcart has been providing professional expertise to organisations and individuals for almost 50 years.
We are an independent group and are proud of our experienced teams of highly qualified, professional staff who offer international business support services around the world.
Dixcart works closely with professional intermediaries worldwide. These include accountants, fiduciaries and lawyers.
Dixcart Management (Cyprus) Limited can assist you every step of the way when a Cyprus International Trust is being created.
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.