A trust enables individuals to control the distribution of their property during their lifetime or after their death. The trusts legal framework in Cyprus is based on English Law, i.e. the Principles of Equity and Statute Law, and it is one of the most attractive legal frameworks worldwide.
The Cyprus International Trusts (CITs) are governed by the Law 69(I)/ 1992 as amended by Law 20(I)/ 2012 and have some advantages which cannot be found in other trusts jurisdictions. The new legislation aimed to make CITs more efficient, effective and accessible, as well as, to transform Cyprus into a leading trust jurisdiction worldwide. It should be noted that a CIT may last for an indefinite period. Furthermore, the registration of the CIT is not mandatory. Hence, confidentiality is guaranteed.
Basic structure of trusts:
- The Settlor or Grantor is the person who creates the trust. S/he is the owner of the property placed under the trust.
- The settlor transfers the property to the Trustee.
- The Trustee is the physical or the legal person who agrees to hold the “trust assets” in its name for the benefit of the Beneficiaries.
In the case of CITs, the settlor is not a tax resident of Cyprus during the year preceding the year in which the trust was created. The settlors may relocate to Cyprus after the establishment of the CIT. Beneficiaries may relocate to Cyprus one year after the trust creation. Have in mind that at least one of the Trustees must be resident of Cyprus.
Uses of CITs:
Some examples are presented below:
- The purpose of the trust could be to hold the property for minors and future generations;
- The purpose of the trust could be to establish a fund for the benefit of family members;
- A CIT is ideal for individuals with somehow complicated family structures, such as divorced spouses and children from different marriages;
- A CIT could be used as an investment vehicle;
- The purpose of the trust could be to give an incentive to employees, i.e. via employee trusts of various kinds
- A CIT could be used as a vehicle for promoting charities and other causes;
- A CIT could be used as a vehicle for asset protection;
- A CIT could be part of commercial arrangements: e.g. to protect commercial lenders
Requirements for a valid trust:
- The Settlor must be an adult of sound mind.
- For a valid trust to be created the following three certainties must exist:
- Certainty of intention: evidence of express intention of the Settlor to create the trust. This is usually evidenced by the trust instrument.
- Certainty of subject matter: the trust assets must be readily identifiable, i.e. money, shares or other movable property, immovable property, etc.
- Certainty of objects: the identity of all the intended beneficiaries of the trust must be ascertained or ascertainable at the time of setting up the trust.
- No formalities, registration or reporting requirements are mandatory under Cyprus Law.
The legal team of Michael Chambers & Co. LLC is able to provide you with proper guidance on all the matters related to Cyprus International Trusts. If you wish to create a trust or find more information about CITs, then please contact one of our lawyers: [email protected]