YIOLA STAVRAKI
L.L.C.
ADVOCATES

INTERNATIONAL TRUSTS LAW

In July 1992, Cyprus enacted the International Trusts Law 69(I)/92 (the “Law”). The Law regulates the establishment and administration of offshore trusts and is designed to complete the spectrum of services which Cyprus offers as an offshore centre.

The most crucial provisions of the Law are the following:

  • Criteria

    First of all, for a trust to be considered international and thus fall under the ambit of the Law, the following criteria must be met:

    • the settler and beneficiaries are not permanent residents of Cyprus;

    • at least one of the trustees is a permanent resident of Cyprus; and

    • the trust property does not relate to any immoveable property situated in Cyprus.

    It is also noteworthy that a trust shall not fail to qualify as an international trust simply by reason that either the settler or the trustee or any one or more of the beneficiaries is a Cyprus offshore company. This can have a number of advantages, as explained in the following pages.

  • Validity of Trust



    According to sections 3(2) and 3(3), no trust shall be void unless and to the extent that it is proven in Court by a creditor that at the time of the transfer to the trust this was done with the intent to defraud. The burden of proof for this lies with the creditor. Further, no action may be brought against the trustee after two years have elapsed from the date of the said transfer.

  • Perpetuities and Accumulation



    According to section 5 of the Law, the perpetuity period for non charitable trusts is one hundred years, while according to section 6, income may accumulate for any period within the period of the trust.

  • Governing Law



    Section 9 provides that the law of the Trust may change to and form the law of the Republic of Cyprus, if so authorized by the terms of the Trust. This provision, accompanied by the possibility of having one or more trustees, one of whom is not a Cyprus resident, deals effectively with potential reservation about the political situation in Cyprus.

  • Confidentiality



    Section 11 of the Law provides that any trustee or any other person including government officials and officers of the Central Bank of Cyprus are prohibited from disclosing any information about the trust. Further, under sections 11 (2) and (3), a Court may by order allow such disclosure of information where this is crucial for the outcome of particular civil or criminal proceedings.

  • Taxation



    Under section 12 (1):

    • the income and gains of a trust derived or deemed to derive outside the Republic of Cyprus shall be exempt of all Cyprus taxes;

    • no estate duty is payable in respect to any assets belonging to the trust;

    • all income and profits derived from trust property outside the Republic of Cyprus are exempt of all taxation; and

    • no estate duty or other inheritance tax are payable in relation to the trust property.



    Under this section, the trust is liable to taxation in Cyprus (though its foreign income is taxed at 0%), hence preserving the possibility of arguing that it is a resident, thus acquiring protection under the various tax treaties concluded with Cyprus.

  • Stamp Duty

    Finally, the instrument of the international trust is subject to flat stamp duty of CYP 250.

TRUSTEE



The Trustee could be a:

  • Cyprus offshore entity; or

  • Local Cypriot resident or company

Where the Trustee is a local Cypriot resident, it is possible to gain protection under the various double tax treaties concluded between Cyprus and many other countries. This is also possible where the intended property is put into a Cyprus offshore company and the trust owns, instead of the property itself, the shares of the offshore company.