Cyprus: Law of Offshore
Cypriot trust law is based on the Cyprus Trustee Law, Cap. 193 (1955), which derives from the English Trustee Act 1925. Then, in 1992, the International Trusts Law was introduced; this helped to bring the regime in line with normal international practice, though it has now mostly been superseded. Since 2004, Cypriot law has been brought into line with EU laws and directives on trusts.
In 2012, a new law was introduced which increased the powers of both settlors and trustees. The latter now have extensive investment options, including some in immovable property, which was previously forbidden.
Of the three types of trust available, only the last will normally be of interest to the international settlor.
(1) Local Trusts are governed by English common law and the Cyprus Trustee Law. The settlor and beneficiaries are normally residents of Cyprus, and the trust and its property are subject to exchange controls.
(2) Offshore Trusts are equally outside the scope of the International Trusts Law. They are similar to Local Trusts except that their beneficiaries must be non-resident and all the trust's activities must be undertaken outside Cyprus.
(3) International Trusts are the normal form of trust used by foreign settlors. International Trusts have the following key characteristics:
- the settlor must be non-resident
- the beneficiaries must also be non-resident (except for local charities)
- one of the trustees must be Cypriot (individual or corporate)
- the trust period may be up to 100 years (longer for charitable trusts)
- confidentiality is protected in the law, and foreign legal judgements are specifically not recognized
- trust documents are in English
- creditors have to prove intention and must claim within two years
- the trust deed must be stamped in Cyprus. Stamp duty of €430 is payable.
- broadly speaking, the income and assets of International Trusts are not taxable in Cyprus
- the trust has to be registered Cyprus Bar Association
There are several types of trust permissible, the most common of which is the discretionary trust. It is often possible to combine Cyprus International Trusts with the island's network of double-tax treaties to create very advantageous results.