Cyprus Trust Formation

Cyprus trust formation are frequently used to facilitate wealth and inheritance planning, in both straight-forward and complex situations involving quick turn-around, cross jurisdictional concerns or complex blended family requirements.

The International Trust Law no. 69 (I)/92 (CIT Law) together with the Trustees Law 1955, Cap 193 (Law) govern the establishment of trusts in Cyprus. The CIT Law was amended in 2012 modernising and significantly enhancing the asset protection features of CITs and permitting for the first time the holding by a CIT of immoveable property based in Cyprus.

Asset protection

A Cyprus trust cannot be set aside by the settlor’s creditors unless and to the extent that the creditors can prove that the trust was created specifically for the purpose of defrauding such creditors. An action by any creditor of the settlor challenging the validity of the trust, on grounds of fraud, must be brought within two years from the date of the transfer of the trust property to such trust.

Pre-Migration arrangement

A Cyprus trust may prove to be an efficient pre-migration vehicle, as high net-worth individuals moving to a high tax country may opt to place some of their funds in an Cyprus International Trust, before such move.

Protection and flexibility of overseas investments

It may be used as a tax planning device for investments overseas. By investing in overseas business through a Cyprus International Trust, both settlor and beneficiaries will be offered with the maximum possible protection and will be able to avoid remittance of their profits from such investments to the country of their residence, which will also enable them to retain the flexibility of their overseas funds.

Estate planning

An individual, through the use of a Cyprus trust, can determine its succession and inheritance plan without being affected by any inheritance laws of any country.

Flexibility

A trust under Cyprus law may be removed from the Cypriot jurisdiction and vice versa. In an ever-changing business world, the availability of the choice between applicable laws is proved to be a significant benefit.

TAXATION

Taxation on Cyprus trusts will be considered on the basis of the beneficiaries’ residence.
Where the beneficiary is resident in Cyprus, the income and gains of an international trust from sources within and outside Cyprus are subject to any taxation which is imposed in Cyprus.
On the other hand, where the beneficiary is not resident in Cyprus, only the income and gains of an international trust from sources within Cyprus will be subject to taxation in Cyprus.

ADVANTAGES OF A CYPRUS TRUST

  • Asset protection from claims
  • Pre-Migration arrangement
  • Protection and flexibility of overseas investments
  • Tax minimization
  • No Income Tax, Gains or Inheritance Tax
  • Stringent Confidentiality provisions

The biggest mistakes when starting a business abroad

Many agencies and company formation law firms do not advise comprehensively or wrongly. Learn what to look for.

Gravity of the situation

Often, these law firms think foreign companies are half-silk, tax evasion is favored and mailbox companies are the leaders rather than the exception. This is true, however, only in some start-up agencies that do not have the necessary expertise. Self-proclaimed law firms that do not employ tax accountants or lawyers usually set up companies that are unlikely to operate legally. We set up and look after companies that can withstand tax audits and that are legally operated.

Do you have to live in the country where you start a company?

You can set up a company worldwide, as long as the respective country allows you as a foreigner to acquire shares in local companies or to act as a managing director. If this is not the case trustees can be used. For example, Cyprus allows every EU citizen to own and run a business. Nevertheless, trustees can be used for the purpose of identity protection. However, it is important that the management takes place locally, in the country in which the company is to be taxable. In addition, a permanent establishment must be set up. Without these, a major tax offices around the world do not recognize the company and in the worst case would require additional payment of corporate and business taxes plus late payment surcharges. We rent you a real office and set up a permanent establishment that meets all requirements beyond doubt.

Problematic Law firms: Secrecy is not regarded.

Some law firms bind customers with toggle contracts and exert pressure when the customer wants to close his company. If you are a client of a law firm that has established a legally flawed company, they can be blackmailed. Because in the case of a fiscal problem, law firms without a license are not bound by a duty of secrecy.

Migrating to a different law firm

We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. The process of changing law firm is made often difficult on purpose. Therefore, we have developed a principle of trust. If you are not satisfied with us and want to change, you can do that at any time. The necessary documents (resignation letter), you receive from us standardized after founding. You are therefore protected against unexpected costs and you are free at any time to visit another law firm. So far we have not lost any customer to another law firm.

Privacy / Firm Location

Your accounting documents are kept safe with us. In addition, all electronic data is stored encrypted and accessible only by us, which are bound to a professional secrecy. All accounting records are also stored locally only. Neither authorities nor hackers are able to access this data.

No taxes?

There are quite a few locations in the world that do not charge taxes on companies or individuals, or only estimate a very low flat rate tax. But this can rarely be used without corresponding change of residence. If you are a resident of any major country, the relevant double taxation agreement is decisive. Providers who promise otherwise lead them to tax evasion, which in the case of discovery usually punishes severely. We advise against setting up companies in countries that have already been blacklisted by the OECD. The formation is usually very cheap, but the tax consequences in your origin country can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous private account no longer exists.

The general requirements and restrictions on the founding of a Cyprus International Trust (The "CIT")

(a) the donor must not be a permanent resident of Cyprus for at least a year before the date of the formation of the Trust.
(b) at least one of the trustees must be a permanent resident of Cyprus.
(c) the beneficiaries, may be a permanent residents of Cyprus.
(d) the Trust property may include immovable property in Cyprus.

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