• The Cyprus International Trust
  • July 30, 2015 | Author: Soteris Flourentzos
  • Law Firm: Soteris Flourentzos & Associates LLC - Limassol Office
  • Cyprus is a reputable international financial center with very attractive opportunities for setting up and operating a trust. The Cyprus International Trust is a powerful tool in the field of estate planning, for the preparation and preventative planning done to legally protect an estate from loss due to unforeseen lawsuits and/or creditors, and is often used in conjunction with a Limited Liability Company to provide even stronger protection, flexibility, and control for the Settlor of a Cyprus International Trust.

    In addition, there is a time limit of two years from the date of the transfer of the assets into the trust. Still, the only way a creditor can have access to those assets is to prove fraudulent conveyance. The burden of proof lies always with the plaintiff. Not only do a plaintiff has to prove fraudulent conveyance before the said time limit, it has to be proven beyond a reasonable doubt, which is an extremely high standard of proof and difficult to attain.

    Typical Characteristics of the Cyprus International Trust
    1. The creator of a Cyprus International Trust i.e. the Settlor and the Beneficiaries must not be tax residents in Cyprus during the year preceding the year of creating a Cyprus International Trust (they may become tax residents subsequently).
    2. All matters in relation to a Cyprus International Trust are determined in accordance with Cyprus Law and the Cyprus Courts have jurisdiction.
    3. Cyprus International Trust may be challenged only on defraud of creditor grounds with a two year limitation period.
    4. Succession, heirship or other laws applicable in foreign jurisdictions or court judgments or orders or arbitral awards or decisions by foreign Competent Authorities do not affect the validity of a Cyprus International Trust or the transfer of property to the Trustees.
    5. The Settlor has the right to reserve many powers including, the powers to revoke or amend the trust, to instruct the Trustees, to appoint and remove Trustees, the protector or the enforcer, to change the law regulating the Cyprus International Trust or the place of its administration and others.
    6. A Cyprus International Trust may last for an indefinite period.
    7. The income of a Cyprus International Trust may be accumulated without limitations.
    8. A Cyprus International Trust may be created for charitable or business or any other purpose.
    9. The law regulating a Cyprus International Trust may be changed to another foreign law
    10. The Trustees are bound by confidentiality and cannot disclose information or documents unless they are ordered by a Cyprus Court or are required by law in certain defined circumstances.
    11. In the case of a Cyprus International Trust which is expressly governed by Cyprus Law, the provisions of the International Trusts Laws of Cyprus apply without reference to other applicable rules of conflict and as a matter of public policy.
    Employments of Cyprus International Trust
    The Cyprus International Trust is widely employed not only for family situations but also in commercial and business schemes. Thus, a Cyprus International Trust may be created:
    1. To hold property for minors.
    2. To avoid forced heirship rules.
    3. To avoid forced matrimonial rules in the event of marriage failure.
    4. To establish a fund for the benefit of family members according to future needs as and when they arise.
    5. As an investment vehicle.
    6. As part of corporate and intra-group arrangements.
    Advantages of Creating a Cyprus International Trust include:
    1. Great flexibility, inexpensive and quick to establish.
    2. Vast case law in support of it.
    3. Protection against liability in legal actions, bankruptcy and tax liens.
    4. Heightened privacy through removing legal ownership.
    5. All forms of assets can be protected.
    6. Numerous tax benefits including:-
    • Income, gains and profits from non-Cyprus sources are exempt from income tax, capital gains tax or any other taxes in Cyprus.
    • Worldwide income, profit 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 Cyprus sourced income in accordance with the Cyprus income tax laws.
    • Dividends, interest or royalties received by a Cyprus International Trust from a Cyprus international business company are not taxable and not subject to any withholding tax.
    • Trust capital received in Cyprus by a foreigner resident or retired in Cyprus from trusts not resident in Cyprus is not taxable on the trustee.
    • The Cyprus International Trust may be used to distribute untaxed income in Cyprus to the beneficiaries, that is to say, family members.
    • Pre-migration: persons who have the intention to migrate to a high tax jurisdiction may obtain tax advantages in their new country by protecting assets in a Cyprus International Trust in Cyprus.
    Indeed, the Cyprus International Trust has many great advantages for someone looking to have the best in iron-clad asset protection and tax optimization. High net worth individuals who seek a bullet proof structure that will ensure future creditors, courts, divorce, and tax challenges will have no standing against their assets, can find solace in a Cyprus International Trust.