Asset Protection & Wealth Management
A Cyprus International Trust (CIT) is a powerful legal tool based on English common law, used by high-net-worth individuals for asset protection, tax planning, and wealth preservation. With the benefits of Cyprus’ favorable tax system, CITs provide confidentiality and long-term security for families and businesses.
Cyprus offers two types of express trusts: the common law express trust and the Cyprus International Trust (CIT). The CIT, distinguished by its specific statutory features, is especially appealing for international tax and estate planning purposes. This guide provides an overview of Cyprus International Trusts, highlighting their benefits and essential regulations.
Use of Cyprus International Trusts
Cyprus International Trusts are typically employed in estate and tax planning, including pre-immigration scenarios. Properly utilized, trusts serve as an excellent tool for asset protection, ensuring confidentiality, and providing security for individuals in high-risk occupations. They can safeguard wealth from creditors, facilitate flexible investment structuring, and address family needs in the future.
Benefits
1. Asset Protection and Confidentiality
A significant aspect of CITs is the two-year limitation period for claims against the trust’s creation or the transfer of assets, effective only if creditors can prove an intention to defraud. The two-year period starts from the asset transfer date, regardless of creditor notice. Moreover, the law mandates confidentiality for trustees, protectors, and related professionals, enhancing trust security and providing a presumption of irrevocability.
2. Attractive Taxation
Nonresident beneficiaries’ income from sources outside Cyprus is taxed at 0%, while normal tax rates apply to income generated within Cyprus. Notably, dividends and interest income are tax-free. Cyprus non-domiciled tax resident beneficiaries are subject to normal tax rates but are exempt from dividend and interest income taxes.
3. Settlor Reserved Powers
The Cyprus International Trusts Law allows the settlor to retain extensive control over the trust and trustees, which is crucial for effective wealth management. The law explicitly states that reserving powers does not imply an intention to defraud creditors. The settlor can reserve powers such as:
- Revoking or amending the trust.
- Allocating or disposing of income or capital.
- Directing trustee actions regarding property management.
Requirements for Creating a Cyprus International Trust
To establish a CIT, the following statutory requirements must be met:
- The settlor must not have been a resident of Cyprus for the year preceding the trust’s creation.
- At least one trustee must be a resident of Cyprus.
- The beneficiaries must not have been residents of Cyprus for the year before the trust’s establishment.
Regulation
- Governance: A CIT is governed by the Cyprus International Trusts Law of 1992. Recent amendments modernize the trust concept in Cyprus, aiming to attract a wider range of high-net-worth individuals.
- Licensing: Trident Trust Company (Cyprus) Ltd. is licensed under the 2012 Law Regulating Companies Providing Administrative Services and Related Matters.
- Stamp Duty: A CIT incurs a stamp duty of €430, with penalties for late payments.
- Anti-Money Laundering Compliance: Cyprus incorporates the 5th Anti-Money Laundering EU Directive, establishing a register of beneficial owners of express trusts administered by the Cyprus Securities and Exchange Commission (CySEC).
Cyprus Private Trust Companies (PTCs)
- A private trust company (PTC) acts as a trustee for a specific CIT or related CITs, allowing high-net-worth individuals and families to maintain control over trust management.
- PTCs do not require a trust business license, as they provide trust services exclus
