Trusts in conjunction with Tax planning and business structure may result beneficial to wealthy individuals, their families or even entrepreneurs. Trusts have been created for different reasons such as, to reduce or minimise taxation, asset protection and alter the disposal of assets on the death of people. A Trust may include property (any kind of assets movable, immovable, cash shares etc) anywhere in the world (but not any immovable property in Cyprus).


An International Trust may in certain cases be used to obtain benefits from an applicable double tax treaty. Also, it may provide asset protection where this is required. Thirdly and perhaps most importantly, International Trusts in Cyprus are exempt from income tax and any other form of tax since income and profits of International Trusts are derived or deemed to be derived from sources outside Cyprus.

Furthermore, Cyprus international trusts have complete freedom from all exchange control provisions. They are also allowed to participate in local business and investment, provided that all income arising from such sources is taxed at normal tax rates.

A Cyprus international trust may establish Cyprus IBC’s, International partnerships or even an international branch and consequently take advantage of the beneficial status available to such entities.

To establish an International Trust certain requirements must be satisfied. These are:

  • the settlor must not be a permanent resident of Cyprus;
  • no beneficiary other than a charity is a permanent resident in Cyprus;
  • the trust property does not include any real property situated in Cyprus; and
  • there must be at all times at least one trustee resident in Cyprus.

Once established the trust can remain in force for a period of one hundred years. The income of the international trust can be accumulated for the whole of this period.

As with companies and partnerships, the residence of a trust plays a vital role on the way it will be assessed to tax. Some of the benefits of an international trust which were stated above, will be lost if the international trust is also deemed resident in a high tax jurisdiction with which Cyprus does not have a favourable double tax treaty.

Taking the UK as an example, according to sections 110, 111 and 151 of the Finance Act 1989, a trust will be deemed resident in the UK if one of the trustees is a UK resident, unless, at the time of the making of the trust, the settlor was neither resident, ordinarily resident, nor domiciled in the UK. If initially, a trust is not deemed resident in the UK due to the settlor being neither resident, ordinarily resident or domiciled in the UK, it may later become so resident if the settlor provides funds for the trust at a time when he is resident, ordinarily resident or domiciled in the UK.

The theory behind international trusts, is that, for settlors resident in high taxation jurisdictions it is possible to minimise their taxation on income or wealth by transferring property to a Cyprus International Trust.


In order for an individual to be a settlor, he must be capable of freely disposing of the property to be settled. This also includes corporate entities. However, the power of a corporate body to be a settlor depends on the powers conferred on it by its constitution or by law. With regard to an International Trust under the International Trusts Law, Law 69(l)/92 a settlor may not be a permanent resident of Cyprus


Any individual can be a beneficiary under a trust including unborn persons, minors and persons of unsound mind. A corporate body capable of holding property may be a beneficiary. A settlor of a Cyprus trust may also be a beneficiary


Any individual being an adult and of sound mind may be a trustee. A corporate entity may be a trustee if permitted by its constitution. The settlor can also act as trustee. Under the International Trusts Law, Law 69(l)/92, at least one of the trustees is required to be a permanent resident of Cyprus. This requirement is satisfied if an IBC or an international partnership is the trustee of the international trust


Under the Trustees Law, Cap 193 the maximum number of trustees at any one time must not exceed four, save in the case of trusts for charitable, religious or public purposes


A trust may be created either orally or in writing. There are no formal requirements for the use of express words. All that is required is a clear intention to create a trust. Where a trust involves immovable property however, it must be in writing. Constructive trusts and resulting trusts are also recognised under Cyprus law.

The International Trusts Law, Law 69(1)/1992 expressly provides that an international trust is exempt from any registration or filing requirements. No prior governmental consents are required nor other formalities to be satisfied

A Cyprus International Trust cannot hold immovable property situated in Cyprus.


The trustee is under a duty to act at all times in the best interests of the beneficiaries. The standard of the duty is that of the reasonable person.


The trustees powers are conferred upon them by statute and the provisions of the trust instrument. Under the Trustees Law, Cap 193 the trustees have certain limited powers in respect of investment, borrowing, sale, employment of agents and application of income. More extensive powers are usually provided for in the trust instrument.


The Trustees must at all times act personally in all matters relating to the trust. However, the Trustees Law, Cap 193 gives the trustees a wide power to employ an agent to transact any business or do any act required to be transacted or done in the execution of the trust. However, a trustee is not liable for the default of an agent employed in good faith.


The perpetuity period of an international trust is 100 years. International trusts that are charitable or purpose trusts may continue indefinitely. Under Section 6 of the International Trusts Law, Law 9(l)/92 income may be accumulated for the entire period of the trust


Under Cyprus law trustees do not have the right to charge remuneration unless the trust instrument so permits or a court so orders. It is usual for the trust instrument to contain a comprehensive charging provision.