Trust registration in Cyprus

Cyprus is an attractive jurisdiction for the creation of trusts. It offers a combination of a strong legal system, trust design flexibility, privacy, and tax advantages.

The most advantageous from the point of view of tax planning and business structuring is the Cyprus International Trust.

Cyprus International Trusts enjoy important tax advantages and provide significant tax planning opportunities:

• lack of formalities for registering a trust;
• Cypriot international trusts are not subject to exchange controls;
• an international trust is irrevocable unless a special right of revocation is reserved in it;
• clear separation of legal ownership from beneficial ownership;
• trusts are exempt from taxation in Cyprus: no income tax, dividends, interest, royalties, inheritance tax, capital gains tax, etc. are paid;
• high level of confidentiality -no registration or reporting is required, and information about the establishment of a trust is disclosed only by court order;
• the possibility of complete anonymity of company ownership through the creation of a discretionary trust for share ownership;
• the trust cannot be invalid or voidable, and no claims can be made against the assets that were transferred to the international trust;
• used for safe storage of funds abroad;
• a trust allows you to own property that cannot be owned in your name.

CONDITIONS FOR THE CREATION OF AN INTERNATIONAL TRUST

There are no formalities, registration, or reporting requirements required to create a trust in Cyprus. The law confirms the validity of a trust created by any person who has reached the age of majority and is of sound mind, but there are a several requirements must be met:

• The trust must have the intention to create trust, so the trust must be specified with reasonable certainty and the beneficiaries identified.
• Founder – a Cypriot non-resident (of age and legal capacity) acts. Cannot be a Cyprus tax resident in the year before the creation of the trust.
• Trustees (trustees) – appointed and accountable to the founder, engaged in the management of trust property. There must be at least one trustee permanently located in Cyprus; the most common method is to create a trust company in Cyprus.
• Beneficiaries – must not be permanent residents of Cyprus (except if it is a charitable organization). They can use their share of the trust property.

• Trust property – property of any type can be transferred to trust management. It is possible to invest through a trust in any movable or immovable property in Cyprus.

TAXATION

The taxation of Cyprus trusts depends on a many of factors, including the residence of the settlor and beneficiaries, and the source of income of the trust.

In case the settlor is a resident of Cyprus, the trust is subject to taxation in Cyprus in accordance with the general tax rules.

If the founder is a non-resident of Cyprus, the trust may be exempt from taxation in Cyprus. That is, the trust will not be subject to tax on profits derived from sources outside Cyprus and capital gains tax on the sale of assets located outside Cyprus.

Beneficiaries of a trust who are non-residents of Cyprus may also be exempt from taxation in Cyprus on income received from the trust (interest, dividends, capital gains, and other types of income).

TERM AND COST OF TRUST REGISTRATION

The average time for creating a trust in Cyprus is 30-40 days. This period includes the time required to prepare the trust agreement, appoint a trustee, transfer assets into the trust, and register the trust with the Cyprus Securities and Exchange Commission (CySec). The final deadlines depend on the complexity of the trust structure and are negotiated individually.

The cost of creating a Cyprus trust also depends on the structure of the trust (holding or trading) and the time spent on agreeing, drawing up, and registering the Deed. Thus, the final cost is agreed upon before work begins.