info@chambersandco.com
+357 250 250 36
CYPRUS
Menu

Trust Creation & Trustee Services in Cyprus

  • Trust Creation & Trustee Services in Cyprus

Trust Creation & Trustee Services in Cyprus

A trust is one of the most versatile financial and legal tools available for individuals and businesses seeking wealth management, asset protection, and estate planning.

The concept of a trust allows a person, known as the settlor, to transfer assets to a trustee, who then manages those assets for the benefit of the designated beneficiaries. Trusts have been in existence for centuries and have been widely recognised for their ability to protect assets, minimise taxes, and ensure smooth succession planning.

In Cyprus, the trust law framework is robust and well-developed, offering strong legal protections, significant tax advantages, and unparalleled confidentiality. The jurisdiction has long been favoured by high-net-worth individuals, business owners, and multinational corporations seeking to structure their wealth efficiently. The introduction of the Cyprus International Trusts (CITs) regime has further cemented the country’s status as a top-tier trust jurisdiction, attracting international investors and expatriates alike.

At Chambers & Co., we specialise in the formation, administration, and management of Cyprus trusts, offering bespoke solutions that align with the unique needs of each client. Whether you require a trust for estate planning, corporate structuring, tax efficiency, or legal protection, our experienced team ensures seamless compliance with Cyprus and international trust regulations.

What is a Trust and How Does It Work?

A trust is a legal arrangement in which assets are placed under the control of a trustee, who manages them on behalf of beneficiaries. The key advantage of a trust lies in the ability to separate ownership and control, ensuring protection from creditors, tax efficiency, and long-term wealth planning. Trusts are particularly beneficial for those who want to safeguard their estate from potential risks, ensure structured inheritance distribution, and manage business assets.

The Core Elements of a Trust

In every trust arrangement, there are four key participants:

  1. The Settlor – This is the individual or entity that establishes the trust and transfers ownership of the assets into it. The settlor’s primary role is to define the terms of the trust and determine the conditions under which assets should be managed and distributed.
  2. The Trustee – The trustee is responsible for managing the assets within the trust in accordance with the provisions set out in the trust deed. The trustee must act in the best interests of the beneficiaries and is legally bound by fiduciary responsibilities that ensure ethical and prudent management.
  3. The Beneficiaries – These are the individuals or entities who are entitled to benefit from the trust. Beneficiaries may receive financial distributions, capital, or other benefits as specified in the trust deed. The nature and extent of their entitlements vary depending on the type of trust established.
  4. The Trust Deed – The trust deed is the foundational legal document that governs the trust’s operation. It outlines the rights, responsibilities, and duties of the trustee, sets forth the rules of asset management, and specifies the conditions under which beneficiaries can access the trust’s assets.

How a Trust Functions

A trust operates by separating legal ownership from beneficial ownership. The trustee holds legal title to the assets, but the beneficiaries retain the right to enjoy the benefits of the trust. This unique structure ensures that assets are safeguarded from personal liabilities, tax burdens, and legal claims, making it a popular tool for individuals and corporations alike.

For instance, a business owner who wants to protect assets from potential litigation can transfer ownership to a trust, ensuring that the assets remain beyond the reach of creditors. Similarly, a family looking to provide financial security for future generations can set up a multi-generational trust, allowing controlled asset distributions over time.

The Legal Framework for Trusts in Cyprus

Cyprus’ reputation as a trust-friendly jurisdiction is further enhanced by its stable legal environment, well-developed financial sector, and favorable international reputation. The country’s legal system, which is heavily influenced by English common law, provides a clear and well-established framework that ensures predictability and security for both individuals and businesses seeking to set up trusts.

Unlike in many civil law jurisdictions, where trusts are either non-existent or poorly defined, Cyprus offers a comprehensive legal infrastructure that recognises a wide range of trust types, catering to personal, corporate, and investment needs.

These factors collectively contribute to Cyprus being a preferred choice for high-net-worth individuals, expatriates, and multinational companies looking to optimise tax efficiency, succession planning, and cross-border asset protection.

The Legal Basis of Cyprus Trusts

The primary legislation governing trusts in Cyprus includes:

 

  1. The Trustees Law of Cyprus, Cap. 193 – This law is based on the English Trustee Act of 1925 and sets out the general principles and obligations applicable to trusts.
  2. The International Trusts Law of 1992 (as amended in 2012) – This law specifically governs Cyprus International Trusts (CITs), offering enhanced confidentiality, tax advantages, and asset protection features.
  3. The Cyprus Securities and Exchange Commission (CySEC) Regulations – These regulations ensure compliance with anti-money laundering (AML) requirements for registered trusts.

Key Features of the Cyprus International Trusts Law

Cyprus International Trusts (CITs) are widely used for estate planning, wealth management, and investment structuring. Some of their most notable advantages include:

  • No residency restrictions for settlors and beneficiaries, making them ideal for non-Cyprus residents.
  • Tax exemptions on foreign income, dividends, and capital gains, ensuring high tax efficiency.
  • Unlimited duration, allowing trusts to operate perpetually.
  • Strong asset protection, preventing creditors from accessing trust assets.

These features make CITs an excellent option for individuals looking to protect and grow their wealth in a stable, business-friendly jurisdiction.

Local Cyprus Trusts vs. International Trusts

While Cyprus International Trusts cater primarily to non-resident individuals, local Cyprus trusts are often utilised for residents seeking estate planning and tax-efficient asset transfers. Unlike CITs, local trusts must comply with Cyprus taxation laws, making them more suitable for domestic inheritance planning and family wealth protection.

For instance, a business owner who wants to protect assets from potential litigation can transfer ownership to a trust, ensuring that the assets remain beyond the reach of creditors. Similarly, a family looking to provide financial security for future generations can set up a multi-generational trust, allowing controlled asset distributions over time.

Types of Trusts and Their Applications

Trusts are highly adaptable legal instruments that can be tailored to meet specific financial, legal, and estate planning objectives. In Cyprus, there are several different types of trusts, each serving a unique purpose.

Revocable vs. Irrevocable Trusts

  • Revocable Trusts allow the settlor to modify or terminate the trust at any time. These trusts are beneficial for individuals who require flexibility in managing their assets.
  • Irrevocable Trusts, once established, cannot be modified or revoked by the settlor. These trusts offer stronger asset protection and are ideal for those seeking long-term wealth preservation.

Fixed vs. Discretionary Trusts

  • Fixed Trusts specify the exact percentage or amount that each beneficiary is entitled to receive. These trusts provide predictability and certainty.
  • Discretionary Trusts allow trustees to exercise full discretion in determining how assets are distributed among beneficiaries. This ensures greater flexibility and adaptability.

Private Trusts vs. Charitable Trusts

  • Private Trusts are used for family wealth management, inheritance planning, and personal asset protection.
  • Charitable Trusts are designed to support philanthropic causes, offering tax exemptions and social benefits.

The Advantages of Cyprus Trusts

Cyprus trusts, particularly Cyprus International Trusts (CITs), are among the most effective asset protection and wealth management tools available to individuals and corporations. Whether for preserving family wealth, structuring a business, or minimising tax liabilities, Cyprus provides a flexible, confidential, and secure legal framework.

Rooted in English common law, the Cyprus International Trusts Law of 1992 (amended in 2012) has reinforced the country’s reputation as a top jurisdiction for trust formation, making it an ideal choice for high-net-worth individuals, corporate entities, and international investors looking for long-term asset security and tax efficiency.

One of the most compelling advantages of Cyprus trusts is their strong asset protection capabilities. CITs effectively shield assets from creditors, legal claims, and forced heirship laws, ensuring that once assets are transferred into a trust, they remain protected, provided there was no fraudulent intent. This makes them a powerful financial instrument for securing wealth from legal uncertainties, economic fluctuations, and political instability, giving settlors peace of mind that their assets will be preserved and distributed according to their wishes.

Confidentiality is another key benefit of Cyprus trusts. Unlike corporations, which are required to disclose their beneficial ownership, trusts remain private, with details of the settlor, beneficiaries, and trust assets undisclosed to the public. While AML regulations have introduced controlled transparency measures, access to the Trusts Beneficial Ownership Register is strictly restricted to regulatory authorities, financial institutions conducting due diligence, and entities with a legitimate interest. This ensures that trust beneficiaries can maintain their anonymity while still benefiting from legal protections.

Whether used for estate planning, business structuring, or investment purposes, Cyprus trusts offer a unique combination of security, flexibility, and privacy, making them an essential tool for individuals and businesses seeking to safeguard and manage their wealth efficiently. Their ability to provide asset protection, tax advantages, and confidentiality makes them a cornerstone of modern wealth management and financial planning strategies.

Tax Benefits of Cyprus Trusts

One of the most compelling reasons to establish a trust in Cyprus is its significant tax advantages, particularly for non-residents. The tax treatment of trusts in Cyprus is structured to encourage foreign investment while maintaining a competitive business environment.

  • No Tax on Foreign-Sourced Income:
    Income earned outside of Cyprus by a Cyprus International Trust is completely exempt from taxation. This includes dividends, rental income, royalties, and business profits derived from foreign operations. This makes CITs an ideal choice for international investors and expatriates who want to structure their assets in a tax-efficient manner.
  • No Capital Gains Tax on Non-Cyprus Assets:
    Any gains from the sale of assets located outside Cyprus are not subject to capital gains tax. This feature is particularly beneficial for individuals who hold substantial real estate, stock portfolios, or other investment assets abroad.
  • No Inheritance or Wealth Tax:
    Cyprus does not impose inheritance tax, estate tax, or wealth tax, making it an ideal jurisdiction for intergenerational wealth planning. High-net-worth individuals seeking to transfer assets to heirs can do so without the burden of excessive taxation.
  • No Tax on Distributions to Non-Resident Beneficiaries:
    If the beneficiaries of a Cyprus International Trust are not Cyprus tax residents, they are not subject to Cyprus taxation on distributions they receive from the trust.
  • Business Structuring Benefits:
    Many international businesses use Cyprus trusts to hold shares in foreign companies, ensuring corporate tax efficiency and anonymity while benefiting from the EU’s tax treaties and investment protection framework.

These tax benefits, combined with comprehensive legal protection, make Cyprus an ideal jurisdiction for trust formation.

Asset Protection with Cyprus Trusts

Asset protection is one of the primary reasons individuals establish trusts in Cyprus. A well-structured trust can effectively shield assets from creditors, legal disputes, and financial claims.

 

  1. Irrevocable Trust Protection:
    Under Cyprus law, an irrevocable trust cannot be unwound or challenged by creditors unless it is proven that the trust was created with the intention to defraud creditors. This two-year statute of limitations protects settlors from retrospective claims.
  2. Shielding Assets from Legal Risks:
    Trusts are often used to protect assets from potential lawsuits, divorce settlements, or forced heirship claims. By placing assets in a trust, ownership is transferred away from the individual, ensuring they are legally separate from personal liabilities.
  3. Protection Against Forced Heirship Laws:
    Many jurisdictions impose forced heirship rules, which require that a portion of an estate be passed on to certain heirs. In contrast, Cyprus trusts allow individuals to freely distribute their assets as they see fit.
  4. International Recognition of Cyprus Trusts:
    Cyprus is a common law jurisdiction, meaning that its trust laws are widely recognised internationally. This makes Cyprus trusts ideal for individuals who own assets in multiple countries and require a global wealth management solution.
  5. Privacy & Confidentiality:
    Unlike companies, which must disclose their ownership structure, trusts in Cyprus are not publicly registered. The names of the settlor and beneficiaries remain confidential, ensuring financial privacy.

The Trust Creation Process in Cyprus

Setting up a trust in Cyprus requires careful planning to ensure full legal compliance, tax efficiency, and optimal asset protection. The process involves several critical steps, each of which must be customised to the needs of the settlor and beneficiaries.

 

Step-by-Step Guide to Establishing a Trust in Cyprus

  1. Define the Purpose of the Trust
    The first step in establishing a trust is to clearly define its objectives. Common purposes include wealth preservation, asset protection, estate planning, business structuring, tax efficiency, and philanthropy.
  2. Choose the Trust Type
    Depending on the settlor’s goals, the trust may be revocable or irrevocable, discretionary or fixed, private or charitable. Each type has different legal and tax implications.
  3. Draft the Trust Deed
    The trust deed is the legal document that establishes the terms and conditions of the trust. It must clearly specify:

    • The settlor’s intentions
    • The role and responsibilities of the trustee
    • The rights of the beneficiaries
    • The rules for managing and distributing assets

  4. Appoint Trustees
    Choosing the right trustee is essential for the proper administration of the trust. Trustees can be:

    • Individuals (family members, advisors, or professionals)
    • Corporate trustees (professional trust service providers like Chambers & Co.)

  5. Transfer Assets into the Trust
    Once the trust is established, the settlor must legally transfer assets into the trust. These assets can include cash, real estate, shares, intellectual property, and business interests.
  6. Register the Trust (if required by CySEC regulations)
    Cyprus International Trusts do not require public registration, but certain express trusts must be registered with the Cyprus Securities and Exchange Commission (CySEC) for compliance with anti-money laundering (AML) laws.
  7. Manage and Administer the Trust
    The trustee is responsible for ongoing trust administration, financial management, and compliance reporting. This includes:

    • Monitoring investments
    • Distributing income to beneficiaries
    • Filing required financial reports
    • Ensuring legal compliance

Professional Trustee Services in Cyprus

A trust is only as strong as the trustee managing it, as the trustee is responsible for safeguarding assets, managing investments, and ensuring distributions are carried out as per the trust deed.

The trustee plays a critical role in ensuring that the trust functions effectively and in accordance with the settlor’s intentions, acting as a fiduciary with a duty to act honestly, prudently, and in the best interests of the beneficiaries. This means that trustees must exercise care, diligence, and impartiality in handling trust assets, ensuring compliance with legal, tax, and financial obligations while maintaining confidentiality and transparency.

A well-chosen trustee not only protects the trust’s assets but also ensures that the trust continues to operate efficiently over multiple generations, making it an essential component of long-term wealth preservation and estate planning.

 

The Role of a Trustee

The trustee is the legal owner of the trust assets and is responsible for:

  • Administering the trust in the best interests of the beneficiaries
  • Ensuring legal compliance with Cyprus trust laws
  • Managing trust investments and assets responsibly
  • Distributing income and capital according to the trust deed
  • Keeping financial records and ensuring tax compliance
  • Acting as an intermediary between the trust and third parties (banks, investment managers, tax authorities, etc.)

Why Appoint a Professional Trustee?

Many high-net-worth individuals and corporations choose to appoint a professional trustee rather than relying on family members or personal advisors. This decision provides numerous advantages:

  1. Expertise in Trust Law & Tax Planning:
    Professional trustees, such as Chambers & Co., have deep knowledge of international trust law, tax structuring, and financial management.
  2. Ensuring Long-Term Stability:
    A professional trustee ensures that the trust remains properly managed across generations.
  3. Avoiding Conflicts of Interest:
    Family members or personal acquaintances may have conflicting interests. A neutral professional trustee ensures objective decision-making.
  4. Legal Compliance & Risk Mitigation:
    Trust regulations can be complex, and failing to comply with legal requirements can expose the trust to risks. Professional trustees ensure full regulatory compliance.

At Chambers & Co., we offer comprehensive trustee services, ensuring that your trust is secure, compliant, and effectively managed.

Compliance, Registration, and Reporting of Cyprus Trusts

Trusts in Cyprus operate under a well-established legal and regulatory framework that balances confidentiality with financial transparency. The Cyprus International Trusts Law, along with amendments to Anti-Money Laundering (AML) legislation, imposes strict compliance requirements to prevent illicit financial activities while maintaining Cyprus’s status as a premier jurisdiction for trust structuring.

One of the most significant changes in recent years has been the introduction of mandatory registration requirements for certain trust structures, particularly express trusts and similar legal arrangements. While trusts remain highly confidential, trustees now have specific registration and reporting obligations under the supervision of the Cyprus Securities and Exchange Commission (CySEC).

The Legal Framework for Trust Compliance in Cyprus

Compliance for Cyprus trusts is primarily governed by:

  • The Cyprus International Trusts Law of 1992 (Amended 2012) – Establishes the legal foundation for trust formation, administration, and asset protection.
  • The Trustees Law of Cyprus, Cap. 193 – Provides guidelines on the fiduciary duties, rights, and responsibilities of trustees.
  • The Cyprus AML Law (Amended 2024) – Implements the EU’s 5th and 6th Anti-Money Laundering Directives (AMLD), introducing the requirement for express trusts to be registered in the Beneficial Ownership Register maintained by CySEC.
  • The Cyprus Securities and Exchange Commission (CySEC) Regulations – Define the registration and ongoing reporting obligations for certain types of trusts.

The most notable development in recent AML regulations is the establishment of the Trusts Beneficial Ownership Register, which requires trustees to submit specific details about trusts and their beneficial owners under certain conditions.

Registration Requirements for Cyprus Trusts

Under Cyprus AML laws, trustees of certain types of express trusts and similar legal arrangements are now required to register the trust’s details with CySEC’s Beneficial Ownership Register.

When is Trust Registration Required?

  1. Trustees Residing in Cyprus:
    • If a trustee is domiciled in Cyprus or operates within Cyprus, they must register the trust with CySEC within fifteen (15) days of their appointment.
  2. Trustees Residing Outside the EU:
    • If a trustee resides outside the European Union, but the trust enters into a business relationship within Cyprus or acquires immovable property in Cyprus, the trust must be registered within 15 days of initiating the business relationship or property purchase.
  3. Trusts Holding Bank Accounts in Cyprus:
    • Any trust that opens a bank account in Cyprus or conducts financial transactions within the country may be required to disclose its beneficial ownership information to CySEC.
  4. Corporate-Owned Trusts:
    • If a trust owns shares in a Cyprus-registered company, it may fall under the scope of AML reporting obligations and require beneficial ownership disclosure.

Information Required for Trust Registration

For a trust to be registered with CySEC’s Beneficial Ownership Register, trustees must submit comprehensive details about the trust, its structure, and the individuals involved.

The information required includes:

  • Name of the trust
  • Country and date of creation
  • Governing law
  • Termination date (if applicable)
  • Country of residence and registered address of the trustee
  • Business relationships established in Cyprus (if any)
  • Immovable property held by the trust in Cyprus (if any)

Beneficial Ownership Information

For each individual involved in the trust (settlor, trustee, protector, beneficiaries), the following details must be submitted:

  • Full name and surname
  • Father’s name
  • Date and place of birth
  • Nationality/nationalities
  • Residential address
  • Identification document details (passport or national ID)
  • Date of death (if applicable)
  • Date on which the individual became a beneficial owner
  • Nature and extent of the rights held
  • Role within the trust (e.g., settlor, trustee, protector, beneficiary)

This information ensures full compliance with AML regulations while maintaining a controlled level of confidentiality.

Access to the Trusts Beneficial Ownership Register

While trusts remain private legal arrangements, the AML regulations ensure that law enforcement and financial regulators can access relevant information when necessary. However, access to the Trusts Beneficial Ownership Register is restricted to specific authorities, including:

  • Supervisory authorities, including CySEC and the Central Bank of Cyprus
  • The Financial Intelligence Unit (MOKAS), responsible for investigating financial crime
  • The Tax Department
  • Customs and Excise Department
  • The Police and other law enforcement agencies
  • Obliged entities conducting due diligence (e.g., banks, investment firms, legal service providers)
  • Entities or individuals with a legitimate interest, such as those involved in legal proceedings related to the trust

Unlike corporate registries, this register is not accessible to the general public, ensuring that trust details remain confidential while adhering to international AML compliance standards.

Ongoing Compliance and Reporting for Cyprus Trusts

Once a trust is registered with CySEC, trustees have ongoing compliance obligations to ensure continued regulatory compliance. These obligations include:

  1. Annual Updates:
    • Trustees must update the information in the register annually or whenever a significant change occurs (e.g., change of trustee, addition or removal of beneficiaries).
  2. Financial Record-Keeping:
    • Trustees must maintain accurate records of all trust transactions, including bank statements, asset valuations, and financial reports.
  3. AML Compliance & Due Diligence:
    • Trustees are required to perform ongoing due diligence on the settlor, beneficiaries, and related parties to ensure that no illicit activities are being conducted through the trust.
  4. Tax Reporting (If Applicable):
    • If a trust has Cyprus tax-resident beneficiaries or earns taxable income within Cyprus, trustees must submit tax returns and financial statements to the Cyprus Tax Department.

Failure to comply with ongoing reporting requirements can lead to financial penalties, regulatory sanctions, and potential criminal liability for the trustee.

Penalties for Non-Compliance with Trust Registration Rules

Non-compliance with the Trusts Beneficial Ownership Register requirements can result in severe legal consequences. Trustees who fail to register a trust within the required timeframe may face:

  • Administrative fines imposed by CySEC
  • Legal action for failure to comply with AML laws
  • Potential blacklisting from financial institutions, preventing the trust from opening bank accounts
  • Criminal liability in cases involving money laundering or fraud

Given the strict penalties, it is crucial for trustees to fully comply with Cyprus trust regulations and seek legal or financial guidance where necessary.

Using Trusts for Business Structuring in Cyprus

Cyprus is a preferred jurisdiction for business structuring and corporate trust planning due to its attractive tax regime, extensive network of double tax treaties, and strong asset protection laws. Many corporate entities and investors use trusts to structure business holdings, facilitate corporate succession planning, and manage employee benefit schemes.

How Businesses Benefit from Cyprus Trusts

  1. Holding Company Structures

    One of the most common applications of a Cyprus trust in business structuring is as a holding vehicle for shares in companies. By placing shares in a trust, business owners can:

    • Protect corporate ownership from litigation and creditors
    • Ensure continuity in management and control of the business
    • Minimize inheritance disputes among family shareholders
    • Facilitate tax-efficient international business operations

  2. Investment Trusts and Fund Management
    Trusts in Cyprus are widely used as investment vehicles for managing real estate portfolios, private equity funds, and diversified financial assets. These structures provide:

    • Confidentiality for investors
    • Flexible tax planning options
    • Simplified transferability of assets

  3. Employee Benefit Trusts (EBTs)
    Many multinational corporations establish Employee Benefit Trusts (EBTs) in Cyprus to:

    • Hold company shares for employee stock option plans (ESOPs)
    • Provide tax-efficient pension and bonus structures
    • Ensure fair and structured employee compensation programs

  4. Family Business Succession Planning
    Business owners who wish to pass on their companies to future generations often use discretionary trusts to retain control while avoiding inheritance disputes. A trust can outline:

    • Rules for appointing future directors and managers
    • Conditions for distributing profits to family members
    • Protection against forced heirship claims

By using a trust structure, businesses mitigate risks, improve operational efficiency, and ensure long-term financial security.

Taxation of Cyprus Trusts

The taxation of trusts in Cyprus depends on the residency status of the settlor, trustees, and beneficiaries. The Cyprus International Trusts Law provides several tax advantages, making it an optimal jurisdiction for tax-efficient wealth management.

Key Tax Benefits of Cyprus Trusts

  1. Tax Exemption on Foreign-Sourced Income

    • If a Cyprus International Trust (CIT) generates income from sources outside Cyprus, this income is completely exempt from Cyprus taxation.
    • Non-resident beneficiaries do not pay tax in Cyprus on distributions they receive from a CIT.

  2. Capital Gains Tax Exemption

    • If the trust sells shares, real estate, or investment assets located outside Cyprus, there is no capital gains tax liability.
    • This makes Cyprus trusts ideal for international investment holdings and real estate portfolios.

  3. No Inheritance or Estate Taxes

    • There is no inheritance tax or estate tax in Cyprus, making it a preferred jurisdiction for wealth preservation and succession planning.

  4. Special Tax Regimes for Resident Trusts

    • If a trust has Cyprus tax-resident beneficiaries, any income sourced within Cyprus may be subject to corporate or personal income tax.

By structuring a trust correctly, individuals and businesses can maximise tax efficiency while ensuring full compliance with international tax laws.

Why Choose Chambers & Co for Cyprus Trust Services?

✔ Expertise in Cyprus & International Trust Law – Decades of experience in wealth management and asset protection.
✔ Full Regulatory Compliance – Ensuring adherence to CySEC, EU, and international trust regulations.
✔ Confidential & Secure Administration – Protecting your assets while maintaining full discretion.
✔ Bespoke Solutions for Individuals & Businesses – Tailored trust structures to meet unique financial goals.

Whether you require a custom trust for estate planning, asset protection, or business structuring, our expert team provides trusted guidance and professional administration. Contact us today to discuss how we can assist with trust creation, trustee services, and asset protection in Cyprus.

Trust Creation & Trustee Services in Cyprus

See how our lawyers can help you with a Cyprus Trust.

ENQUIRE NOW