Cypriot trust law has been shaped on the basis of the English model and the Cyprus Trustee Law Cap.193 emulates the English Trustee Act 1925.
The recent International Trusts Law No. 69 (1) of 1992 opened the way for the creation of international trusts in Cyprus.
A foreigner wishing to establish a Cyprus based trust now has the following options:
- To create a trust, either by a trust deed or by will, and vest in trustees movable property situated in Cyprus or abroad;
- To incorporate a Cyprus company or partnership to be the owner or the manager of movable property to be placed in trust in the Cypriot corporation or in an overseas company and managed by the Cyprus corporation;
- To incorporate in Cyprus a subsidiary company or a branch of an overseas corporation to hold or manage movable property placed in trust in the Cyprus subsidiary or branch of the overseas corporation;
- To set up an international trust in accordance with the provisions of the International Trusts Law No.69(1)/92.
The main provisions of the International Trusts Law No. 69(I) of 1992 are the following:
- The law defines an international trust as one in which the settlor is not a permanent resident in the Republic, one trustee is a permanent resident in the Republic, no beneficiary other than a charitable institution is a permanent resident of the Republic, and the trust property does not include immovable property situated in the Republic. A trust shall not fail to qualify as an international trust by reason only that either the settlor or the sole trustee resides in the Republic or any one or more beneficiaries is an offshore partnership or company.
- The law accords recognition to a “purpose trust” and provides a legal definition of such a trust.
- The settlor’s capacity to transfer assets to the trust is determined by the law of his permanent residence on the basis of his age and sound mind. No rule relating to inheritance or succession either of the Republic or of any other country shall affect the validity of the transfer or disposition.
- The trust is irrevocable notwithstanding that it is voluntary, unless it contains an express power of revocation. It is also not void or voidable in the event of the settlor’s bankruptcy unless made with intent to defraud creditors. The onus of proof of such intent is placed on the creditors and an action against the trustees to avoid the trust on grounds of fraud must be brought within two years of the date of the transfer.
- The duration of the trust may continue until the one hundredth anniversary of the date at which it came into existence, and accumulation may continue for the duration of the trust. Purpose and charitable trusts may carry on indefinitely.
- The trustees’ powers of investment are enlarged and provision is made to change the applicable law of the trust to and from the law of the Republic, provided that: (a) in the case of a change from the law of the Republic, the new applicable law recognises the validity of the trust and the respective interests of the beneficiaries; (b) in the case of a change to the law of the Republic, such change must be recognised by the applicable law of the previously in effect.
- Registration is optional. The confidentiality of information concerning the trust is safeguarded except under a disclosure order by a court of the Republic.
- Taxation of international trusts is abolished completely and the only tax obligation is a stamp duty on the instrument creating the trust. The gains of an international trust from sources outside the Republic are exempted from all taxes in the Republic and no estate duty is chargeable in respect of assets belonging to the trust.