CALL US +357 22 510165 Home About Us Areas Of Practice News & Publications Careers Contact Us Trusts in Cyprus Home › Areas of Practice › Trusts in Cyprus Areas of Practice All you need to know about Trusts in Cyprus At D. Hadjinestoros & Co LLC we have many years of experience in all areas of trust work, including the setting up of Trusts in Cyprus as well as setting up a Cyprus International Trust. We have extensive experience in drafting trust instruments and we provide beneficiaries and trustees with advice in relation to trusts. We also deal with and litigate on be half of trustees and beneficiaries in all types of disputes that may arise in relation to the trust. Examples of work we have undertaken include appointment, retirement and removal of trustees, variation of trusts, tracing assets, challenging the validity of trusts, allegations of breaches of trust, as well as advising on trustees’ rights and duties. Cyprus International Trusts provide significant possibilities for international tax planning and estate planning. Such trusts are exempt from income tax, capital gains tax, estate duty and may hold shares in a Cyprus company without any liability to tax on dividends received. PAGE CONTENT Our Services and Key People Trusts in Cyprus (a General Overview) Requirements of Setting up a Trust in Cyprus Types of Trust in Cyprus The Cyprus International Trust News and Insights Frequently Asked Questions Our Services We have vast experience in setting up Trusts and we have a number of services on offer relating to the setting up and administration of the Trust. Our team of Cyprus Lawyers at D. Hadjinestoros & Co LLC can offer the following services in relation to a trust in Cyprus: Drafting and Setting Up the Trust Manage the Trust Property Administer the Trust in Accordance with the Settlor’s Wishes and Act as Trustees of the Trust Property. Provide Ongoing Advice to the Clients, Beneficiaries or Trustees Handle All Issues Arising with Estate Planning such as the Valuation, Payment of Debts, Third Party Fees, Expenses as well as Payment of Taxes. You may contact us to set up a fully confidential meeting to discuss how we can help you. Key People Michael Hadjinestoros Partner Trusts, Will and and Probate Corporate and Commercial Transactions Banking and Finance Law m.hadjinestoros@hadjinestoros.com (+357)22510165 Michael is a Partner at D. Hadjinestoros & Co LLC and he specialises in international corporate and commercial transactions, intellectual property law and litigation Evripides Hadjinestoros Partner Corporate and Commercial Transactions Debt Collection Trusts, Wills and Probate Banking and Finance Law Employment Law eh@dhadjinestoros.com (+357)22510165 Evripides is a partner at D. Hadjinestoros & Co LLC. After completing the LLB Law degree at Queen Mary University in London in 2009, he then completed a post-graduate diploma in Company Law LLM, at University College London. He graduated with Distinction. In 2016, Evripides published the book «The Law on the Sale of Goods and Consumer Protection in Cyprus», which was published by Nomiki Vivliothiki. He is a lecturer in commercial law at the European University Cyprus. He is also an accredited Mediator, Mediator Trainer and founder of the Cyprus Consumer Center for ADR Trusts in Cyprus – A General Overview. Trusts in Cyprus are governed by the Trustee Law CAP 193 which governs in detail the rules on the appointment, duties and role of trustees as well as the powers of the court when dealing with trusts. A trust in Cyprus is formed when a certain person called the “Settlor” transfers the legal title to property or assets to another person called the “Trustee” so that the Trustee holds the property for the benefit of another person or persons called the “Beneficiary” in accordance with the wishes of the Settlor. The trust can be created at a time where the Settlor is alive or on his death (for example through a testamentary disposition). In the latter scenario, inheritance laws are applicable. To form a trust in Cyprus, the Settlor and the Trustee will sign a Trust Deed whereby all of the terms of the trust together with the duties and the powers of the Trustee are set. Furthermore the Trust Deed will contain the specific purposes of the Trusts indicating how and the extent by which the Trustee can use the property. In order to protect the abuse of certain powers of the beneficiary, a certain person may be appointed named as the “Protector” who must be advised in the exercise of specific powers of the Trustee as these may be determined in the Trust Instrument. Purposes of a Trust in Cyprus The purposes of trusts in Cyprus vary. For example, they may be executed in order to protect property against creditors or overly spending spouses or children, for charitable purposes, commercial purposes or, in order to provide for future generations. Furthermore, trusts in Cyprus can be created over shares in order not to disclose the ultimate beneficial owner and keep such an arrangement confidential (of course this is subject to legal disclosure and AML requirements) Example: A wealthy owner of a company (“X”) which in turn owns buildings and assets in Cyprus, wishes on his death to share all of the assets in his company between his children and grandchildren and nothing to his wife. Under the laws of intestacy in Cyprus, on his death X could only transfer ¼ of his assets to his grandchildren whilst the ¾ would be distributed between his wife and children. Therefore, X can create a trust in Cyprus whereby either the shares in his company or the assets themselves are held by the Trustee for the benefit of the himself and on his death for his children and grandchildren. In this way, he can avoid the intestacy rules by transferring the legal title to the Trustee. In this scenario of a typical Trust in Cyprus, X is the Settlor and X, the Children and the Grandchildren are the Beneficiaries under the Trust. It is important to note in the above example that even though a trust may be created on death of the settlor (for example by stating in his will that such a trust is created) this would not avoid the rules of intestacy in Cyprus and therefore it is better if the trust is created during the lifetime of the settlor. Duties of the Trustee of a Trust in Cyprus There are a number of duties imposed on the Trustee of a trust in Cyprus. For example, he must comply with the terms of the trust, a duty to act impartially and treat the beneficiaries equally, duty to act in good faith and to exercise reasonable care and skill, a duty to keep accounts and supply information as well as other fiduciary duties. Powers of the Trustee of a trust in Cyprus Under the Trusts Law, the Trustee also has certain powers such as the power of trustees for sale to sell by auction, to sell subject to depreciatory conditions, to give receipts, compound liabilities, raise money by sale charge or otherwise, devolve the powers of the trust, insure the property, employ agents or delegate the trusts in case of absence abroad. Furthermore, the Trustee may appoint new or additional trustees. Additionally, the Trustee is protected against liability through certain provisions stated in the law. What property or assets can be put under a trust in Cyprus The property or assets which can be subject to a trust in Cyprus can be of any kind including money, shares, movable property or goods, choses in action, real property as well as any other property which may be subject to ownership – provided that the Settlor is the owner (i.e. is the legal owner) of the property. Example of assets which may be subject to a Cyprus Trust are the following: Paintings Shares, stock or debentures Cash Money in Bank Accounts Jewellery Land House or apartment Requirements of setting up a Trust in Cyprus To set up a trust in Cyprus it is imperative that there exists a Settlor a Trustee and a Beneficiary although one person may fall into the category of the other (for example a Settlor can also be a Beneficiary or a Trustee). Furthermore, it is imperative that every trust in Cyprus fulfil the three certainties. These are, (1) the certainty of intention, (2) certainty of subject matter and (3) certainty of objects. Certainty of Intention The certainty of intention is the requirement that the settlor must intend to create a trust and not something else (for example a gift or a loan or just transfer possession) Certainty of Subject Matter The certainty of subject matter is the requirement that the Cyprus trust property must be identifiable and be clear what forms part of the trust property (for example an account held with the bank, an immovable property etc) Certainty of Objects The certainty of objects is the requirement that the Cyprus Trust Beneficiaries are identifiable i.e. that the trustees are able at any point in time to compile a complete list. Types of Trusts in Cyprus 1) Express Trust Express Trust is the trust which is created by a Trust instrument whereby the settlor uses clear word of intention to create it. 2) Implied Trusts An implied trust is implied by law in cases that its non-recognition would create injustice. Such is the case for example in case one of the spouses owns the family home but it would be just to recognise that the other spouse should also own part of it. In such case the trust may be implied so that one of the spouses holds the house on trust on behalf of the other. The following are types of implied trust in Cyprus: Resulting Trust Resulting trusts arise due to an implied intention of the settlor or of the parties. For example if an elderly and infirm individual appoints another individual (for example his child) to his account in order for the child to help with in groceries and other necessities, the court, in case of death of the elderly will impose a resulting trust on the account i.e. that the appointed individual holds the money in the account on trust for all the inheritors of the elderly (for example other children) Constructive Trust This trust does not depend on the intention of the parties and will generally be used in cases someone commits fraud or in order to do justice. For example if a government official receives a bribe in breach of his duties, the court will recognise that he holds the bribe amount on trust. 3) Fixed Trust A fixed trust is a trust where each of the beneficiaries has a fixed and proportionate interest in the trust property and this interest is specified by the settlor on the outset. An example is a unit trust whereby the beneficiary’s interest is determined by the units held in the trust. 4) Discretionary Trust This is the type of trust where the Trustee has wide discretion on how to deal with the trust property and for this reason the Trustee may decide on how to share the property between the beneficiaries. 4) Charitable Trust The charitable trust is a trust established for a charitable purpose. It is a form of express trust which must be for the benefit of the public or a section of the public and not a group of individuals. It must be for a charitable purpose and for the public benefit (such as the promotion of education or religion). Trusts in Cyprus continue to exist for life in being plus 21 years. Therefore if a trust deed is for the benefit of the 4 children of the settlor, its maximum duration is for the duration of the life of the child to die last plus 21 years. Note however that in case the trust is a Cyprus International Trust, then this rule does not apply and the trust may continue indefinitely. Cyprus International Trust – An Overview The Cyprus Law on International Trusts has been amended in 2012 making Cyprus one of the most competitive jurisdictions to set up such a Trust. What is a Cyprus International Trust For a Trust to qualify as a Cyprus International Trust, the following conditions must be satisfied: The Settlor (can either be a legal or natural person) must not be a permanent resident of Cyprus during the year preceding the creation of the Trust. At least one of the Trustees should be a permanent resident of Cyprus. The Beneficiaries (either legal or natural persons) must not be residents of Cyprus during the year preceding the creation of the Trust. There is a requirement of €430 to be paid as stamp duty as well as €30 for registration. The Cyprus International Trust can be used for commercial or charitable purposes or to provide for one’s family. In its commercial form, a Cyprus International Trust can be used as an investment vehicle, to provide for employees’ pensions or other non-charitable purposes. In its family form, the Cyprus International Trust may be used to hold property for the benefit of others secretly, for minors and/or their successors. It can also be used to protect property against inheritors who may otherwise spend it or to protect property which has otherwise been apportioned to a married couple and their marriage has failed. Uses of the Cyprus International Trust There are many uses in setting up a Cyprus International Trust: A Cyprus International Trust can appoint nominee shareholders to hold shares in a company on behalf of the trust. In such cases, dividends, interest or royalties received by a Cyprus International Trust are not subject to withholding tax. Used to divest personal assets. For example, if someone wishes to dispose of an asset, he can do so by transferring it to the Cyprus International Trust. Used to avoid exchange controls. For example, if in the future exchange controls are placed for remittance of funds back to the home country, the Cyprus International Trust can be used to keep the funds as part of the Trust and outside the scope of the exchange control remittance regulations. A Cyprus International Trust can be used for estate planning. For example, through the trust the settlor can arrange for someone who wouldn’t inherit otherwise (due to forced heirship rules), to inherit. Benefits of the Cyprus International Trust A. Difficult to Challenge First of all, there is a two-year limitation period for challenging a Cyprus International Trust (or challenging the transfer of assets to the Cyprus International Trust) and the only reason it can be challenged is for defrauding creditors; the burden of proof being on the creditors to prove that the Cyprus International Trust (or the transfer of assets to the Trust) was made with the intent to defraud them. Secondly, the laws of succession applicable in any country (including court orders or decisions or Governmental Authorities) will not affect the validity of a Cyprus International Trust or the transfer of property to the Trustee of a Cyprus International Trust. B. Law Governing the Cyprus International Trust If the law chosen to govern the Cyprus International Trust is Cyprus law, then as a matter of public policy the provisions in the Cyprus International Trust will be upheld regardless of conflicting provisions in the laws of Cyprus or laws of other jurisdictions. For this reason, any inheritance laws in any other jurisdiction will not be applied. C. Flexibility of the Trust The Settlor (provided this is expressed in the instrument) can reserve powers, which include the power to amend the trust, appoint or remove trustees, protectors or enforcers, or change the law governing the trust. It should be noted that amendments require the approval of the court. D. Confidentiality Under our law, the Trustees of a Cyprus International Trust have an obligation not to disclose information or documents unless ordered to do so by the court or are required by law (For example the Trustee must register the Beneficiaries for tax purposes). What is required however is for the trust to be registered at the Trusts Registry for as long as the trust is governed by Cyprus Law. This registry is not available to the public for inspection but can only be inspected by the Competent Authorities. E. Tax Advantages If the majority of the beneficiaries are Cyprus residents, then the trust will be taxed as a domestic trust. i.e. on all of its income worldwide. If the majority of the beneficiaries are non-residents, then the trust will be taxed only on its Cyprus-income. Given that the Cyprus International Trust is a transparent tax entity, a beneficiary who is not tax-resident in Cyprus, will be taxed only on income derived in Cyprus (note that in case the beneficiary is a tax resident in Cyprus, he will be taxed on his worldwide income). There are no inheritance related taxes in Cyprus. The Trustees are responsible for paying the taxes of a Cyprus International Trust. F. Other Advantages of the Cyprus International Trust Indefinite in duration. Avoidance of forced heirships. Can be used to protect assets against legal action. This information does not constitute legal advice. For a free, confidential consultation with a specialist in this area you can contact us to arrange an appointment by phone or email. News and Insights Covid-19 Update: Suspension of evictions in cases of non-payment of rent. Which tenants does it concern? Duties of Property Lawyers in Cyprus Rental Agreements – How are they impacted by the Coronavirus and the Government Decrees on the Suspension of Business Activities? Consumer Protection in Loans Relating to Residential Property in Cyprus VAT in Cyprus: Value Added Tax on Immovable Property Load more Frequently Asked Questions relating to Trusts in Cyprus How can a lawyer in Cyprus assist me in forming a Trust? Does a Trust in Cyprus Need to be Registered? What Property can be the subject matter of a Trust in Cyprus? How can a lawyer in Cyprus assist me with the administration of a Trust in Cyprus? Is a Cyprus International Trust different from any other Trust? For a free, confidential consultation on Trusts in Cyprus, you can contact us by phone, email or through the online form: T: (+357) 22510165 | F: (+357) 22318214 | E: office@dhadjinestoros.com By Clicking send you accept to the processing of the data you submit in accordance with the terms of our Privacy Policy. Copyright © 2020 D. Hadjinestoros & Co LLC. All Rights Reserved We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkNoPrivacy policy