Category Archives: Cyprus International Trust

Why Hong Kong firms and HNWI are considering Cyprus as their new base?

Cyprus , located between three continents – Africa, Europe, Asia – is a proud member of the Eurozone and home to around 1 million people. Since 2014, Cyprus has been experiencing a strong and rapid growth and is fast becoming an appealing destination.

With the recent turmoil in Hong Kong, many firms and HNWI are seeking refuge to a jurisdiction that provides safety, convenience and potential for growth.

With foreign investors increasingly choosing Cyprus – the economic climate, real estate prospects, investment funds, shipping, construction, tourism, filming and energy sectors – are sectors which have experienced consistent growth. The competitive, modern and transparent legal, financial and regulatory framework that Cyprus possesses allows the island to be a credible and highly reputable financial center for Hong Kong firms and HWNI to set up base.

As an ex-British colony, Cyprus shares similarities with Hong Kong, as both jurisdictions have retained the common law legal system which is based on the British legal system.

Why Choose Cyprus?

Enjoy the right quality of life

When considering where to redomicile or set up your business, it is always vital to consider the quality of life you aim to have for you, your family and your employees. Choosing Cyprus ensures you and your team work in a Mediterranean island that provides you with a very high standard of living that includes:

  • One of the EU’s best all-year climates and one of the best worldwide,
  • Over 65 Blue Flag status beaches for all tastes (highest % per capita) sports, entertainment etc,
  • High level public & private healthcare services,
  • Short distances – can travel from one side of the island to another in 2 ½ hours
  • Considered one of the world’s safest countries with one of the lowest crime rates in E.U.,
  • Reasonable cost of living with great choice fresh products always available – both local and international
  • Real Estate available to cater to all needs – city centre, skyscraper, beach, countryside etc
  • High Level of Education – many private schools and private institutions offering a high level of education in English

Accessing Talent

E.U.
  • Benefit from the local impressive skilled workforce Cyprus has to offer, direct access to a great pool of talent from other EU countries
  • Benefit from programmes allowing international professionals to easily relocate
  • Work visas for non-EU nationals are available to enable companies to hire from non- EU countries whenever the required skill-set is not available locally
Cyprus
  • Almost half of workforce have a tertiary degree – one of highest in the EU,
  • Rapid growing education system – one of the highest enrolments in domestic universities with many UK universities partnering up with Cyprus universities,
  • High number of Cypriots educated abroad – more Cypriots earn degrees from foreign universities than any other EU country

Setting up with lower costs

  • Launching and running your business in Cyprus reduces your overall set-up costs compared to other EU countries resulting in more budget being allocated for growth and development of your business.
  • Lower labour costs than other E.U. countries
  • Lower office rentals costs than most E.U. countries
  • Low business support costs and high quality – services like I.T., accounting, legal etc.

Benefiting through tax incentives

Cyprus has one of the lowest tax burdens in Europe and a highly competitive set of tax incentives for businesses and individuals. It is great to note that people who decide to move their personal tax residency to Cyprus, will automatically be considered as non-domiciled in Cyprus for a maximum of 17 years.

  • different set of rules for ‘tax residents’ and ‘non-tax residents’
  • corporate tax is only 12,5 %, which is one of the lowest in the E.U.
  • very low tonnage tax for ship-owning and shipping companies,
  • 2,5 % on income from Intellectual Property
  • no corporate tax for ‘non tax resident’ companies
  • no Cyprus tax on disposal or trading of securities
  • no Cyprus tax on income from dividends on a company level, for a period of four years
  • no Cyprus withholding tax on dividends paid to shareholders outside of Cyprus
  • no Cyprus tax on dividend income for non-domiciled but tax-resident individuals
  • no Cyprus tax on interest income on account of non-residents with banks in Cyprus
  • no Cyprus tax for International Trusts
  • full tax group relief
  • offshore entities from other countries are allowed as shareholders
Non-Tax Residents
  • Non-tax resident Cyprus Companies are not liable for corporate tax in Cyprus, provided that each director/s do not reside in Cyprus, and the companies do not conduct any business with natural or legal persons residing in Cyprus, but,
  • Where a non-tax resident Cyprus Company conducts business in Cyprus, the profit from this business will be taxed in Cyprus.

Communicating, Commuting and Access

With English being a predominant language spoken between businesses, when setting up your business you can benefit from the island’s high percentage of English-speaking citizens. Cyprus is also centrally located between 3 continents (Asia, Europe, Africa) making it easy to commute back home or for business purposes:

  • 73% of Cypriots speak English – official language due to British Colonization
  • English widely accepted for business transactions, government services, contracts, banking and other day-to-day functions you’ll be undertaking
  • Daily flights in & out of Cyprus through Larnaca & Paphos international airports to multiple destinations making your global commuting easier
  • Full access to European Markets with free movement of goods, services, capital
  • Access to 40+ EU trade agreements with countries outside the E.U.
  • UK-Cyprus trade relations existed before the E.U. and will continue strongly after Brexit as Cyprus belongs to the Commonwealth and has sovereign British Bases on the island

Panayiotis Z. Toulouras LLC provides legal services to clients worldwide. Our law firm, with the assistance of our vast network of associates, provides strategic legal advice for:

  • the incorporation of a Cyprus company
  • setting up a branch in Cyprus
  • re-domiciliation of a Hong Kong company to Cyprus
  • opening of bank accounts
  • business visa applications and other visas
  • work permits
  • employment contracts
  • purchase/rental of property for commercial purposes
  • purchase/rental of property for residential purposes
  • applications for permanent & temporary residency
  • applications for naturalization
  • Cyprus international trust creation
  • I.P. registration

Cyprus International Trusts – What you need to know.

Cyprus International Trusts  – What You Need To Know


Who We are

Our Trusts specialist team consults private individuals, families and international institutions on the creation of Cyprus International Trusts (CIT) and offshore trusts. We advise clients on the appropriate jurisdiction that best caters their needs, focusing on meeting their asset protection and tax demands.

Our team provides expert consultation regarding all ongoing trust issues affecting settlors, trustees and beneficiaries, appearing before courts and government authorities when necessary.

We act as trustees, protectors and represent international institutions, HNW families and individuals in the acquisition and disposal of property, globally, and advise our clients on all the associated legal and tax issues.

”CITs are used to benefit from the Cyprus advantageous tax system and allows entities acting as investment vehicles to maintain a level of privacy and confidentiality.”

Trust Requirements 

For a valid trust to be created, the following three certainties must be present:

a)  Certainty of intention – evidence of the express intention of the Settlor to create the trust

b)  Certainty of subject matter – the assets part of the trust property must be easily identifiable

c)  Certainty of objects – the identity of the trust beneficiaries must be ascertained or ascertainable at the time of setting up the trust

Trust Conditions

The restrictions imposed by the Law mainly focus on the residency status:

• The Settlor – Can be either a natural or legal person but must not be resident of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust

• The Trustee – At least one of the Trustees must be resident of the Republic of Cyprus* for the whole duration of the Cyprus International Trust

• The Beneficiary – Must not be resident/s of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust and that applies equally whether the beneficiary is a natural or legal person

*The term “resident of the Republic of Cyprus” has the same meaning as under the Income Tax Laws of Cyprus

i.e. physical person considered a resident in Cyprus if they reside in Cyprus for a period exceeding in aggregate 183 days in any calendar year. A company is considered a resident provided its management and control are exercised in the Republic of Cyprus.

”Our Trusts specialist team consults private individuals, families and international institutions on the creation of Cyprus International Trusts and offshore trusts.”

Power of Settlor

New amendments of the Law provide more protection and flexibility for the CIT as the Settlor is able to reserve certain powers for himself, rights over or in the trust property either in his capacity as a Settlor, as Protector or Enforcer of the Trust without it affecting the validity nor the execution of the Trust:

a) The revocation, amendment of the terms of the trust or any trusts or powers arising wholly or partly from the trust

b) The allocation, distribution, payment or other disposition of income or capital from the trust property or issuance of directions to conduct any of these actions

c) The exercise of powers of a director or officer or the issuance of binding directions regarding the appointment or removal of any Board member or officer of any company, which is owned by the trust, either wholly or partially conferred on such property

d) The issuance of binding directions to the trustee in connection with the purchase, retention, sale, management, loan, pledge or charge over property of the trust or the exercise of any powers or rights

e) The appointment or termination of any investment manager or investment adviser

f) Changing the applicable law governing the trust or place of management of the trust

g) The restriction of the exercise of any power or the discretionary power of the trustee(e.g. requesting that these be exercised only with the approval of the settlor or any other person expressly mentioned in the terms of the trust

Power of Trustees

Trustees are appointed by the Settlor. There are no rules as to how many trustees should be appointed.

Main Duties:

a) To administer the trust property prudently, and

b) To comply strictly with the terms of the trust

Trustees do not have the power to vary the terms of the trust under any circumstances. However, all beneficiaries of full age and capacity can authorise all together to alter the trust. Trustees in their private lives may not act in any way that brings them in conflict with their duties as trustees.

Under the Law, the Trustees can have extensive investment powers, e.g. to make capital distribution, to borrow, to guarantee, to mortgage, to employ, to invest/lend money. They may also hold, maintain or invest in movable and immovable property in Cyprus and abroad, including shares in companies incorporated in Cyprus.

Unless the trust instrument expressly provides otherwise, trustees are not entitled to any payment for their services but can be reimbursed from the trust property for any expenses they incur in performing their duties. Action taken by the trustee that is in excess of their powers or contravenes the terms of the trust instrument is a “breach of trust”.

”The Cypriot international Trust regime is designed to make Cyprus more attractive to clients living outside Cyprus.”

Formalities

The formalities that need to be met for the creation of a Cyprus International Trust are:

a) Comply with the residency requirements of the International Trusts law

b)  Provide the information related to the Trustees to the relevant competent authority

c)  If the Cyprus International Trust is created by a will, the formal requirements indicated in the relevant law on wills must be complied with

d)  Payment of stamp duty of €430

e)  Make sure that the CIT satisfies the “Three Certainties” 

Type of Trusts

a) Private Trusts (Express, Resulting, Constructive, Implied)

b) Charitable Trusts

c) Fixed Trusts

d) Discretionary Trusts

Purposes

  • Tax Planning
  • Protection of Assets
  • Preservation of Family Assets
  • Administration of Estate/Avoidance of Forced Heirship
  • Confidentiality Investment
  • Pension Schemes – Employees or Dependents
  • Charitable Initiatives
  • Reward Schemes – Employees or Dependents
  • Continuation of a Family Business

Divesting of personal assets – An individual who wishes to divest himself of personal assets can achieve this by transferring them to a CIT.

Investing in business overseas – An individual can invest in business overseas to ensure profits and dividends received are not remitted to the country of his residence, by setting up a CIT to invest in overseas business

Investment Holding company – A trust can be used in one country to own an underlying investment holding company in another. This can provide maximum protection for both settlor and beneficially alike.

Flexibility – The Cyprus law allows the removal of a trust from its jurisdiction and vice versa. This gives the necessary flexibility where transfer becomes advantageous because of change of circumstances.

”Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person.”

Benefits

Income

  • If the Beneficiary is not a Cyprus tax resident, the income CIT receives from outside of Cyprus will not be subject to tax. Income received from Cyprus is subject to tax.
  • If the Beneficiary is a Cyprus tax resident, the income CIT receives from outside/inside of Cyprus will be subject to tax.
  • CIT does not pay tax on income received from outside of Cyprus.
  • CIT does not pay tax on interest received, provided the beneficiary is not a Cyprus tax resident.

Double Taxation: International Trusts come under the scope of double taxation treaties with more than 60 countries.

Dividends: Dividends, interest and other income received by a trust from a Cyprus company are not subject to tax.

Payments to beneficiaries: No withholding tax on payments to beneficiaries provided that they are not resident in Cyprus.

Capital Gains: Any gains from asset disposal, other than immovable property situated in Cyprus, made by the CIT are not subject to capital gains tax in Cyprus.

Estate Duty: No estate duty is payable by a CIT that was formed for the purposes of estate duty planning.

Convenience

  • CIT laws does not require Settlor or Beneficiary to be resident of Cyprus and requires one trustee to be a Cyprus resident
  • CIT can last for an indefinite time

Confidentiality: Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person. Only the Court may order and result in disclosure of such information e.g. in cases of fraud.

Registration 

Trusts must be registered to 3 competent authorities, one being the Cyprus Bar Association. To ensure confidentiality, only the 3 authorities will have access to trust information and it will not be made publicly available under any circumstances.

The Settlor and Beneficiaries are not registered and this is kept confidential. The Trustee’s responsibility is to notify the relevant competent authority fifteen (15) days after the creation of the Cyprus International Trust and to notify for any amendment made to the Trust.

What We Do

  • Trust creation
  • Trust management
  • Trust termination
  • Trust disputes
  • Trustee and Protector services
  • Preparation of Trust accounts and annual tax returns
  • Family asset protection and inheritance advice
  • Tailor-made wealth management structures
  • Opening, administrating and monitoring all bank accounts
  • Distributions to beneficiaries

To download our Cyprus International Trusts presentation, please click here (pdf).

Contact Us

Address: Griva Digeni 13, Megaro Stavrakis, Office 501, 6030, Larnaca, Cyprus

Telephone: +357 24 623 800                                     Fax: +357 24 332 991

Email: info@toulouraslaw.com                                 Website: www.toulouraslaw.com

Cyprus International Trust Purposes – #4 Confidentiality

Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person. Government or official may not disclose any information or documents in connection with the identity of the settlors, beneficiaries, the accounts or property of the trust.

Only the Court may order and result in disclosure of such information e.g. in cases of fraud.

Finally, The register of private trusts only requests the below trust information:

  • The name of the trust
  • The name and full address of every trustee at all relevant times
  • The date of establishment of the trust
  • The date of any change in the law governing the trust to or from Cyprus law
  • The date of termination of the trust

Panayiotis Z. Toulouras LLC provides assistance concerning the formation and administration of Cyprus International Trusts.

Our areas of work include, among others:

    • Trustee Services
    • Advising on family asset protection and inheritance issues
    • Creation of tailor-made wealth management structures to safeguard your assets
    • Opening, administrating and monitoring all bank accounts
    • Making distributions to the beneficiaries

Cyprus International Trust Purposes – #1 Asset Protection

The Cyprus International Trust (CIT) secures that no claim can be brought in respect of assets transferred to an International Trust. CIT protects your assets in the event of settlor’s bankruptcy/liquidation or creditor proceedings against the settlor. For the CIT to be set aside it must be proven that the Trust was made by the settlor with an intention to defraud the creditors.

The beneficiaries are the beneficial owners of equitable interests in the trust assets, however, they do not hold legal title to the assets. Asset protection type of trust can fulfill the goal of adequate asset protection planning, by insulating assets from claims by creditors without concealment or tax evasion. The common goal of asset protection trusts is to limit the interests of beneficiaries in such a way so as to preclude creditors from collecting against trust assets.

Panayiotis Z. Toulouras LLC provides assistance concerning the formation and administration of Cyprus International Trusts.

Our areas of work include, among others:

    • Trustee Services
    • Advising on family asset protection and inheritance issues
    • Creation of tailor-made wealth management structures to safeguard your assets
    • Opening, administrating and monitoring all bank accounts
    • Making distributions to the beneficiaries

Cyprus International Trust Purposes – #3 Preservation of Family Assets

The preservation of family wealth and passing it through the generations can be very complex, Cyprus International Trusts are able to provide assurance that your assets will be protected, used in the way its desired and kept in the family.

A trust structure allows wealth to be kept secure and to provide much-needed protection from any unforeseen circumstances affecting the beneficiaries e.g. such as divorce, death, etc

Trust also allows for conflicts between family members to be avoided when the settlor has passed away but also to ensure that beneficiaries cannot access the money until they are of a sufficiently mature age.

Lastly, a lot of clients use trusts to hold assets for children, to ensure they cannot access the money until they are of a sufficiently mature age. Funds gifted to children which are held in a discretionary trust can reassure the beneficiaries and settlors that it will be used appropriately:

E.g.

  1. Buying Assets; The settlor of a trust can state all the circumstances where the trust money can be released in situations like buying a car where the settlor can even specify even the type of car that can be bought.
  2. Funding school fees: Where the older generation may wish to help a future grand-child financially.

Panayiotis Z. Toulouras LLC provides assistance concerning the formation and administration of Cyprus International Trusts.

Our areas of work include, among others:

    • Trustee Services
    • Advising on family asset protection and inheritance issues
    • Creation of tailor-made wealth management structures to safeguard your assets
    • Opening, administrating and monitoring all bank accounts
    • Making distributions to the beneficiaries