TRUST
At our firm, we possess extensive expertise in establishing and administering Cyprus International Trusts, offering a robust solution for individuals residing in high-tax jurisdictions seeking to optimize their tax liabilities.
By transferring a variety of assets ranging from movable and immovable properties to shares and cash into a Cyprus International Trust, settlors can potentially reduce their tax exposure. This is facilitated by the advantageous double taxation treaty network that Cyprus offers, which can be leveraged under a well-structured tax plan.
In addition to tax benefits, establishing a Cyprus International Trust ensures a high level of confidentiality. There is no mandate for registering or publicly disclosing the financial outcomes of the trust, allowing the trust deed to remain private to the involved parties. This contrasts with many jurisdictions where a deceased individual’s will becomes public record.
Advantages of Establishing a Cyprus International Trust:
Trusts and their beneficiaries are exempt from taxation in Cyprus.
No capital gains tax applies to International Trusts.
Distributions made to beneficiaries are not subject to taxation in Cyprus.
Assets can be added to the trust at any time.
The trust can hold shares in a Cyprus company or a foreign entity.
Should the Cyprus Trust hold shares in a Cyprus company, it can benefit from the tax incentives available to international companies in Cyprus.
Trust assets are distinctly separated from the settlor’s personal assets.
The trust can be structured as either revocable or irrevocable.
Types of Trusts
Discretionary Trust
In a Discretionary Trust, trustees have the latitude to manage the trust assets in the best interests of the beneficiaries. This type of trust is favored for several reasons:
Beneficiaries do not incur tax liabilities on the trust assets since they lack a legal claim until trustees decide to make distributions.
The contingent interest held by beneficiaries protects the trust assets from being claimed by creditors in the event of bankruptcy.
The Trust Deed is adaptable, allowing trustees to modify beneficiary interests as circumstances evolve without requiring consent from all beneficiaries or court intervention.
Fixed Trust
In this arrangement, trustees are required to adhere strictly to the terms outlined in the Trust Deed, with no discretion in asset distribution.
Trading Trust
A Trading Trust typically designates a corporate entity as the trustee, enabling it to engage in trading activities. This structure keeps the existence of the trust confidential, as all documentation is conducted in the name of the trustee company.
Purpose Trust or Accumulation and Maintenance Trust
This type of trust involves accumulating income and capital until specific conditions are met, such as the beneficiaries reaching a certain age or a predetermined event, like marriage, occurring, as specified in the Trust Deed.
Tax Considerations
According to Section 12(1) of the relevant legislation, income and gains derived from sources outside Cyprus by an international trust are exempt from all taxation within Cyprus. Furthermore, there are no estate duties or inheritance taxes applicable to assets held by an international trust.
Consequently, Cyprus International Trusts enjoy complete exemption from income tax, capital gains tax, special contribution tax, and any other local taxes. Additionally, interest accrued from trust funds held in any Cyprus bank account is also tax-exempt.
It is important to note that while the wording of the legislation implies that the trust may be subject to taxation in Cyprus (albeit at a zero rate for foreign income), this provision allows for the possibility of asserting residency in relation to various tax treaties.
Given the complexities surrounding trust taxation, our firm is well-equipped to navigate these intricacies and provide tailored solutions to meet our clients’ needs.