Cyprus International Trust
A Cyprus International Trust (CIT) is a trust created under Cyprus law that is set up for the benefit of non-Cyprus residents. It is a popular and flexible vehicle for asset protection and wealth management, as it offers many benefits, such as favourable tax treatment, confidentiality, and ease of administration.
A Cyprus International Trust 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.
Overview of Cyprus International Trust
A CIT is a trust that is established by a non-Cyprus resident settlor for the benefit of one or more beneficiaries who are also non-Cyprus residents. The trustee of the CIT must be a Cyprus resident, and the trust must not have any business activities or any real estate property located in Cyprus. The CIT is governed by the Cyprus International Trusts Law of 1992, as amended in 2012, which provides a clear legal framework for the creation and administration of the trust.
Benefits of Cyprus International Trust
One of the most significant benefits of the CIT is the favourable tax treatment. Income, gains, and profits from non-Cyprus sources are exempt from income tax, capital gains tax, special defence contribution, or any other taxes in Cyprus. Moreover, worldwide income, profits, and gains are taxable in Cyprus only where the beneficiary is a Cyprus tax resident. Beneficiaries who are non-residents of Cyprus are taxed only on their Cyprus sourced income according to Cyprus income tax laws. Additionally, dividends received by a CIT are not taxable and are not subject to withholding tax in Cyprus.
Legal Framework of Cyprus International Trust
The CIT is governed by the Cyprus International Trusts Law of 1992, as amended in 2012. The law provides a clear legal framework for the creation and administration of the trust.
According to section 8 of the 2012 Law, trustees have extensive investment powers, including holding, maintaining or investing in movable and immovable property in Cyprus and abroad, including shares in companies incorporated in Cyprus.
The requirements for the settlor of a Cyprus International Trust (CIT) are that they must be non-Cyprus residents at the time of the creation of the trust. This means that if the settlor has not lived in Cyprus for a certain period of time prior to the creation of the trust, they meet the residency requirements for the purposes of the CIT.
The settlor is the individual who establishes the trust and transfers assets into it. They determine the terms of the trust and the beneficiaries who will benefit from the assets held in trust. By requiring the settlor to be a non-Cyprus resident, the law ensures that the CIT is not subject to tax on its worldwide income, profits, and gains.
It is important to note that the settlor can still benefit from the assets held in the CIT, provided that they are not resident in Cyprus at the time of the creation of the trust. This means that the settlor can transfer assets into the trust, and the trust can generate income, profits, and gains that can be distributed to the beneficiaries, without being subject to tax in Cyprus.
Furthermore, the law allows the settlor to retain certain powers over the trust, such as the power to appoint and remove trustees, the power to revoke or amend the trust, and the power to add or remove beneficiaries. However, it is important to ensure that the settlor’s powers are limited and do not result in them retaining too much control over the assets held in the trust, as this could jeopardise the tax status of the trust.
Under the Cyprus International Trusts, there are specific requirements for the trustees of a Cyprus International Trust (CIT). One of these requirements is that at least one trustee must be a permanent resident of Cyprus.
The role of the trustee in a CIT is crucial, as they are responsible for managing the assets of the trust and ensuring that the trust is administered in accordance with the wishes of the settlor and the interests of the beneficiaries. By requiring at least one trustee to be a permanent resident of Cyprus, the law ensures that there is a local presence to oversee the administration of the trust.
In addition to the residency requirement, the law specifies that the trustee must be a licensed corporate service provider. This ensures that the trustee is subject to the regulatory oversight of the authorities in Cyprus and is held to high standards of professionalism and accountability.
The law also requires that the trustee must act in good faith, in the best interests of the beneficiaries, and with due care and diligence. The trustee has a legal obligation to manage the assets of the trust in a prudent and responsible manner, and to comply with all relevant laws and regulations.
It is important to note that the trustee does not have an ownership interest in the assets of the trust. Rather, they hold the assets on behalf of the beneficiaries, and are legally obligated to act in their best interests. Additionally, the law specifies that the trustee cannot be a beneficiary of the trust, unless they are also acting in their capacity as a trustee.