| Our firm holds extensive expertise on the creation of a wide spectrum of trust structures from very simple bare trusts to more complicated discretionary trusts or “shareholding trusts”. • International Trusts The main Trust law of Cyprus enacted In 1955 is based on the English Trustee Act 1925 and on the doctrines of equity and case law of England. In order to strengthen the infrastructure of Cyprus as a truly international financial centre, the Cyprus Authorities have introduced through new legislation - Law 69(1) I 1992 - the concept of the Cyprus International Trust The creation of a trust can: - mitigate tax liabilities, or help in the avoidance of tax;
- preserve confidentiality;
- allow a family to retain ownership of property;
- permit the control and enjoyment of assets to be maintained, despite giving or selling the assets to others;
- benefit certain groups of people, for example, the mentally disabled, while control of the property is withheld from them;
- act as a management vehicle. Investment Trust Funds, banks, etc. through a structure of a trust and an offshore company that acts as a trustee manage funds for their clients;
Basic requirements for a trust to qualify as an international trust: For a trust to qualify as an international trust, the following requirements must be fulfilled: 1. the settler must not be a permanent resident of Cyprus;
2. no beneficiary, other than charitable institution, can be a permanent resident of Cyprus;
3. the trust property cannot include any immovable property in Cyprus;
4. at least one trustee must be a permanent resident in Cyprus.
Cyprus International Companies do qualify as residents of Cyprus for the purpose of the Law. Some reasons for creating a Cyprus International trust - Trusts and beneficiaries of trusts are not taxed in Cyprus provided both the settler and the beneficiaries are non-resident and the trust property is not in Cyprus.
- No capital gains tax is paid by international trusts.
- Credit interest on a foreign currency account held at any bank in Cyprus is not taxed.
- A Cyprus international trust may be a shareholder in a Cyprus offshore company and thereby enjoy the tax and other benefits of offshore companies. Its liability is limited to the original capital paid and confidentiality is ensured by the use of nominees.
- There are no registrations or reporting requirements for trusts established in Cyprus and the names of the trustees, and others named in the trust document, are not disclosed. The only authority to be informed of the creation of an international trust is the Central Bank of Cyprus.
- The Law applicable to a Cyprus international trust can be expressly changed to a foreign law and an existing foreign trust can select Cyprus Law, if the foreign law itself recognizes such a change.
- No estate duty is paid by international trusts.
• Types of Trusts Trusts are divided in the following main categories: 1. Private Trusts
a) expressly created by the settlor.
b) can be created by deed, in writing, by will and, with some exceptions, orally.
c) The intention of the settlor must be made absolutely clear. The three certainties listed in paragraph 1 above must be present. The beneficiaries have enforcement powers in respect of the trust. 1.1. Express Private Trusts
Express trusts are, as their name suggests, expressly created by the settlor. They can be created by deed, in writing, by will and, with some exceptions, orally.
The intention of the settlor must be made absolutely clear. The three certainties listed in paragraph 1 above must be present.
1.2 Resulting Trust
A resulting trust arises from the implied, rather than the express intention of the settlor. This intention can be inferred by the way that the settlor acts or behaves.
An example of a resulting trust would be where A gives money to B to buy an asset. If there is no evidence that A intended for B to keep the asset, then B is presumed to hold the asset on trust for A.
But if, in the above example, A was B’s father and A had given money to B so that B could purchase books for school, then the presumption arises that A intended for B to keep the books and therefore there is no resulting trust.
1.3 Constructive Trust
They are imposed by law independently of what anyone intended.
An example of a constructive trust would be where A gives money to B to hold for C. If B then gives the money to D and D knows that B was holding the money for C, then D will be construed as to also hold the money on trust for C.
These are trusts that arise from the implied intention of the settlor and will either be resulting or constructive trusts.
1.4 Implied Trusts
These are trusts that arise from the implied intention of the settlor and will either be resulting or constructive trusts. 2. Charitable Trusts
There is no legal definition of what constitutes a charity. Usually a trust that is set up for the relief of poverty, the advancement of education or religion or any other purpose that is beneficial to the community is considered to be a charitable trust. In particular they are set up for certain public purposes. They are enforced at the suit of the Attorney General acting on behalf of the state.
It is possible to set up an international charitable trust in Cyprus under the International Trusts Law. 3. Fixed trusts
These are trusts where the share or interest of the beneficiaries in the trust property is specified by the settlor; and 4. Discretionary trust
These are trusts where the trustees may, at their discretion determine what share or interest of the trust property should go to each member of a class of beneficiaries.
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