The concept of trusts is based on the english concept of equity.

What is trust?

It is established by the "settlor" who transfers into the trust certain property. He then, appoints "the trustees" to hold the trust property, for the benefit of "the beneficiaries".

There is a legislation (The International Trust Law (89(1)/92) which was enacted in order to govern the establishment and operation of trusts created by non-residents for the benefit of non-residents.

What is an International trust?

If the following conditions are satisfied, then the trust would be considered as an international trust:

A trust would qualify as an international trust if it satisfies the following conditions:

• The settlor is not a permanent resident of Cyprus
• One of the trustees must be a permanent resident of Cyprus; an offshore company which is set up in Cyprus will qualify as a permanent resident of Cyprus
• No beneficiary other than a charitable institution, must be a permanent resident of Cyprus
• The trust property must not include any immovable property situated in Cyprus.

Duration

The duration of an international trust can be up to 100 years unless provided otherwise in the trust deed.

Relocation of an international trust

The International Trust Law allows for the removal of an international trust from Cyprus and vice versa provided the trust deed allows such a change of jurisdiction and the foreign jurisdiction recognises the Cyprus trust.

Confidentiality

Under the provisions of the International Trust Law, the trustees, government and Central Bank are prevented from disclosing any information on an international trust unless ordered by court in case of civil or criminal proceedings.

Taxation and International Trusts

International trusts enjoy the following tax advantages in Cyprus:

• The income of the trust is exempt from tax both in the hands of the trustees and the beneficiaries
• No capital gains tax is charged on the disposal of assets held by international trusts
• Interest on foreign currency trust funds deposited with any bank in Cyprus is tax exempt
• Investment income (which my include income received from a Cyprus international trust) which is received by any non-resident beneficiary in Cyprus would attract a maximum of 5% taxation after allowing for a tax free amount of C£2.000 in each calendar year.

A Cyprus international trust may hold shares (though its trustees) in a Cyprus offshore company thus further enjoying advantages.

For complete control over the trust assets, the settlor may set up a Cyprus offshore company, which will also be the trustee of the Cyprus international trust. In such a case, the settlor, having control of the Cyprus offshore company will also be able to indirectly control the trust assets.