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The Benefits Of Setting Up A Trust In Cyprus

5 min read

The Benefits Of Setting Up A Trust In Cyprus

Cyprus is a Mediterranean island, which belongs to the EU, and is a mixture of Greek and Turkish cultures. It was colonized by the British until its independence in 1960 and invaded by Turkey in 1974, leading to a turbulent but diverse history. Nevertheless, this country offers many benefits if you want to reduce your tax bill or protect the generational wealth you have worked hard for. In addition to tax and legal benefits, it also offers an affordable cost of living, and the locals are welcoming. The country's legal and taxation structure will also welcome your wealth!

Setting up a trust in Cyprus offers numerous benefits for various parties involved. The beneficiary, whether an individual or a business, can enjoy the advantages provided by the country's trust laws and court system. Cyprus has established reliable and efficient legal frameworks that make the process of setting up and managing a trust easy, cheap, and fast.

Cyprus offers accessible and helpful trust services, making it convenient for people to establish and administer their trusts. The registration and administration processes are straightforward, and the country's trust laws provide clear rules and guidelines for proper governance. This level of transparency and clarity is crucial for ensuring the success and effectiveness of the trust arrangement.

 

What is a trust?

Put simply, a trust is a legal tool that allows the settlor (also known as grantor) to include assets such as real estate, stocks, intellectual property, or investments so that it is managed according to their instructions. There are three parties involved:

  • Settlor, who transfers the aforesaid assets;

  • Trustee, who is in charge of managing them;

  • And beneficiaries, who are the individuals or organizations benefiting from them. Typically family members, spouses, charity, etc.

Trusts are an excellent instrument for protecting wealth and privacy, getting tax benefits, avoiding inheritance taxes, and much more. In short, Cyprus offers the best International Trust Jurisdiction. Many governments all around the globe are teasing another increase in taxes and even expropriations, so knowing this might interest you.

For settlors, the trust provides an opportunity to secure their assets and protect the interests of their beneficiaries, such as their children or other designated individuals or organizations. The trust allows the settlor to transfer ownership rights to a trusted third party, known as the trustee, who holds and manages the assets in accordance with the settlor's instructions. Cyprus's trust laws facilitate efficient succession planning, allowing individuals to distribute their wealth and assets according to their wishes. This enables smooth transitions of assets to the next generation, minimizing potential disputes and ensuring a well-regulated transfer of wealth.

 

By establishing a trust in Cyprus, business owners can enjoy the advantages of a reliable and business-friendly jurisdiction.By establishing a trust in Cyprus, business owners can enjoy the advantages of a reliable and business-friendly jurisdiction.

Cyprus International Trust (CIT)

In order to possess a valid Cyprus trust, the following requirements must be simultaneously fulfilled:

  • The settlor must not be a Cyprus resident during the calendar year before the creation of the trust;

  • The beneficiaries, except for charities, must also meet the previous requirement;

  • And at least one trustee must be a Cyprus resident during the lifetime of the trust. 

It must be noted that an individual is considered a Cyprus resident if they spend over 183 days a year living in Cyprus. As for companies, they are considered as such if they are run in the country. Being a former British colony, Cyprus Trust Law combines Common Law as well as the Principles of Equity and is also regulated by both a local law called Trustees Law and an international one called The International Trusts Law.

Furthermore, to be settled correctly, the trust must also be certain that the settler does aim to establish a trust (Certainty of Intention), the assets are concrete and recognizable (Certainty of subject matter), and the beneficiaries must be attributable throughout the entire trust’s lifetime (Certainty of Objects).

The significant benefits of setting up a trust in Cyprus also extend to international business owners. The country's trust laws create a favorable environment for asset protection, confidentiality, and tax planning. By establishing a trust in Cyprus, business owners can optimize their financial arrangements and enjoy the advantages of a reliable and business-friendly jurisdiction.

 

Cyprus's trust laws facilitate efficient succession planning, allowing individuals to distribute their wealth and assets according to their wishes

Cyprus's trust laws facilitate efficient succession planning, allowing individuals to distribute their wealth and assets according to their wishes

A Cyprus Trust offers the settlor many powers after The International Cyprus Trust 1992 Law was amended in 2012. For instance, he/she can change the terms of the trust and even revocate it, appoint or terminate trustees, investment managers, investments advisers and beneficiaries, or govern the powers of the trustee. Moreover, the settlor is able to have exclusive powers such as commanding the trustee on how to purchase, sell, finance, or administer the Trust assets. Since the Trust might be considered a sham, for the settlor could be virtually exercising all these extended powers, it is usually a good practice to assign them to a figure named protector so that the settlor can effectively delegate the administration of the Trust. All in all, a settlor can count on great flexibility to take control of their wealth.

 

Related content: The Basics Of How To Get A Second Passport Or A Second Residency

 

As for the trustee, he/she has the duties of sticking with the terms of the Trust, acting in good faith as well as skillfully, and carefully treating the beneficiaries the same, confidentiality, etc. However, he/she also has powers such as investing in any property abroad or in Cyprus, appointing new trustees and delegating tasks. In the main, a trustee is not allowed to change the terms regulating the trust unless all beneficiaries are capable adults and give him/her permission to operate in a different fashion. Indeed, a trustee cannot exercise powers beyond the agreement, in which case beneficiaries can bring him/her to trial.

A Cyprus Trust requires a €430 stamp duty. Once created, there is a 30-day period to stamp the trust deed. Otherwise, a fine is charged, and the amount will be determined by the delay. A CIT can have unlimited duration.

 

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Benefits of Having a Trust in Cyprus

BENEFITS OF SETTING UP A TRUST IN CYPRUS

Aside from the technical legal advantages, it is noteworthy that Cyprus has competitive Law, Fund Management, and Accounting sectors, so one can be sure that his/her assets are in good hands. Also, Trusts in Cyprus offer considerable privacy for both the settlor and the beneficiaries, for neither trustees nor protectors can uncover information or documents such as the name of the Trust, its termination and establishment dates, or the name and full address of each and every trustee.

In terms of taxation, Cyprus is an excellent option for protecting assets, planning your inheritance, and even avoiding (or at least reducing) the taxes you pay.

Income tax is only applicable for Cyprus tax residents. Otherwise, income is only taxed if it is Cyprus sourced. In other words, income from non-Cyprus sources is not subject to income tax, capital gains tax, or any kind of taxes in Cyrpus. Tax obligations to your home country or country of residence are outside the scope of this article. We suggest you speak with a licensed tax professional to get a legal opinion based on your individual circumstances.

Not only do the settlor and beneficiaries benefit from low or even no taxes at all in Cyprus, but they also have excellent management flexibility. Namely, he/she can include assets no matter when, personal assets are independent of CIT’s assets, and Trust property can hold Real Estate and several types of assets located in any country.

 

Cyprus offers a useful and significant platform for establishing trusts

Cyprus offers a useful and significant platform for establishing trusts

KEY TAKEAWAYS OF SETTING UP A TRUST IN CYPRUS

Up until this point, we have covered many benefits of CITs. This type of trust offers a wide range of both legal and tax benefits, making Cyprus a relevant actor in the Wealth Protection scene. You will have access to a competent set of professionals in the Law, Accounting, and Fund Management industries. As a settlor, you will easily appoint trustees and beneficiaries and redistribute your wealth as you (not the State) please. On top of that, privacy is strongly guaranteed.

In conclusion, the benefits of setting up a trust in Cyprus are manifold and important. The country's efficient and accessible trust services, coupled with its reliable legal framework, make it an attractive choice for individuals and businesses seeking asset protection, succession planning, and efficient wealth management. Cyprus offers a useful and significant platform for establishing trusts, providing peace of mind and confidence to those involved.

 


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Mikkel Thorup

Written by Mikkel Thorup

Mikkel Thorup is the world’s most sought-after expat consultant. He focuses on helping high-net-worth private clients to legally mitigate tax liabilities, obtain a second residency and citizenship, and assemble a portfolio of foreign investments including international real estate, timber plantations, agricultural land and other hard-money tangible assets. Mikkel is the Founder and CEO at Expat Money®, a private consulting firm started in 2017. He hosts the popular weekly podcast, the Expat Money Show, and wrote the definitive #1-Best Selling book Expat Secrets - How To Pay Zero Taxes, Live Overseas And Make Giant Piles Of Money, and his second book: Expats Guide On Moving To Mexico.

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