(a) Definition

The International Trust Law 1992 (No. 69(I) of 1992) (“hereinafter “the Law”), defines an International Trust as being a trust in respect of which:

• The Settlor is not a permanent resident of the Republic of Cyprus
• No Beneficiary (other than a charity) is a permanent resident of the Republic of Cyprus
• The trust property does not include any real property situated in the Republic of Cyprus
• At least one Trustee is resident in the Republic of Cyprus at all times
• The trust will still qualify as an International Trust even if the Settlor or the local Trustee or a Beneficiary (or any combination of those) is a the Republic of Cyprus registered company.
  

(b) Validity

A Cyprus International Trust can be validly created by any non-resident who is of full age and sound mind under the law of his domicile, and no foreign law relating to inheritance or succession will invalidate the Cyprus International Trust. Moreover the International Trust will not be set aside by the Settlor's creditors in the event of the Settlor's bankruptcy or liquidation unless, and to the extent that the creditors can show that the trust was created with the intent to defraud them. The onus of proof shall be on the creditors alleging fraud, and any action against the International Trust must be brought within two years from the date of the transfer of the property.
 

(c) Irrevocability

An International Trust will be presumed to be irrevocable by the Settlor or his lawful representatives unless a specific power of revocation is reserved in the trust deed itself.
 

(d) Perpetuity Period

An International Trust may remain in force for up to 100 (one hundred) years not withstanding any statutory provision in the Republic of Cyprus or of the laws of any other country to the contrary.

The rule against perpetuities does not apply to charitable trusts
 

(e) Proper Law of the Trust

The law applicable to a Cyprus International Trust can be expressly changed to a foreign law, provided that the new law recognises the validity of the trust and the respective interest of the Beneficiaries; a trust established in a foreign jurisdiction may by its terms select Cyprus law provided that the foreign law itself recognises such a change.
 

(f) Variation of Trust

The Cyprus courts have powers to vary the terms of the trust on the lines of the English Variation of Trust Act, 1958. More specifically, the courts upon application, may amend or repeal the terms of the International Trust or the powers of the Trustees to manage the trust if they are satisfied that the proposed arrangement shall be in the interest of the person on whose behalf the application is made, and no substantial prejudice will be caused to the interests of any other party who is concerned with the International Trust.
 

(g) Registration

International Trusts are exempt from the duty of registration under the provision of the Law. There is however a fixed stamp duty of CY£250 payable upon the creation of the International Trust.
 

(h) Confidentiality

Confidentiality and privacy of the constitution of International Trusts as well as their transactions and activities are assets which are highly prized and sought after. This aspect is a cornerstone of the Law which ensures that the Trustee or any other person, including any officer of the Government of the Republic of Cyprus and of the Central Bank of Cyprus, may not disclose to any person any information or documents in relation to:

• The name of the Settlor or any of the Beneficiaries
• The consultations of the Trustee regarding the exercise of his power, discretion or duties
• The reasoning of any such specific exercise of power, discretion, or duties, or the elements supporting the aforesaid reasoning
• The exercise of the power, discretion, or the performance of the duties of the Trustee
• Matters pertaining to the accounting affairs of the International Trust

The duty of confidentiality, which is imposed above, is subject to two exceptions:

• The Trustee is under an obligation to disclose all documents and information relating to the accounts of the trust to the Beneficiary
• The Court, before which, criminal or civil proceedings are pending, may order the disclosure of documents or information relating to an International Trust if it is satisfied that such a disclosure is substantially important to the outcome of the pending proceedings.
   

(i) Accumulation of the income of the International Trust

The income of the International Trust can be accumulated for the whole of the perpetuity period. The Trustees of an International Trust have extensive investment powers and may vary the investment or retain its original state, as long as they exercise the diligence and prudence which is expected of a reasonable person exercising the same duties.

 
D. TAXATION OF THE INTERNATIONAL TRUSTS

The income tax and the profits of the International Trust derived from, or deemed to be derived from a source outside the Republic of Cyprus, are exempt from income tax imposed in Cyprus such as capital gains and special contributions. The property of the trust is not subject to estate duty. Trust income such as royalties, interest, or dividends received from an international business company is exempt from income tax at the hands of the Trustees. The Beneficiaries of the International Trust are also exempt from payment of income tax in respect of any money they may receive from the Trustees.

 
E. WHERE THE TRUST FUND IS SITUATED AND WHAT IT INCLUDES

The trust fund may be situated anywhere in the world (but any immovable property must be outside Cyprus) and it may include any assets such as movable, immovable property, cash, and shares.

 
F. CHARITABLE TRUSTS AND PURPOSE TRUST

1. Subject to the provisions of the Constitution of the Republic of Cyprus, and notwithstanding the existence of any contrary legal provision under the laws of the Republic of Cyprus or any other country, an International Trust shall be deemed to be charitable where the trust has, as its main purpose, the achievement of one or more of the following:
• the relief of poverty
• the advancement of education
• the advancement of religion
• other purposes beneficial to the public in general
  
2. An International Trust established for one or more of the objects or purposes set out in subsection  1 shall be deemed to be charitable notwithstanding:
• that the object or purposes may not be of public nature or for the benefit of the public but may benefit a section of the public, or that it may benefit one or more particular persons or objects or persons within a class of persons; or
• that the International Trust is liable to be modified  or terminated whether by the exercise of a power of appointment or the disposition of assets; or
• that the Trustee has the power to defer the distribution of the benefits to any charity of the trust for a period not exceeding the period of the trust; or
• that the International Trust is or is considered to be in the category of discretionary trusts.
  
3. Notwithstanding the existence of any contrary legal provision in the law of the Republic of Cyprus or of any other country, an International Trust shall not be void or voidable by reason only that it is a purpose trust, provided that in the cases when the trust is not a perpetual trust or when it may be terminated, the instrument creating the trust shall specify the event or the events upon which the trust terminates, and shall provide for the disposition of its net assets upon its termination. An International Trust so created shall be enforceable by the Settlor or his personal representatives, or by the person or persons named in the instrument establishing the trust as the person or persons appointed to enforce the trust, and the trust shall be enforceable at the instance of the person or persons so named notwithstanding that such person or persons are not Beneficiaries under the trust.

 
G. USES OF INTERNATIONAL TRUSTS 

• As a tax planning device;
• to accumulate income and capital;
• as a way in which one can hold shares in Cyprus international business companies;
• all other uses applying to trusts in general such as:
• Protection of the assets for the benefit of children until they reach a certain age
• Preservation of the assets and the property of the family
• To maintain confidentiality of transactions
• Protection of assets of the Settlor against creditors with the exception that if it is shown that the trust was established for the purpose of defrauding the creditors, this protection will not apply;
• the establishment of charities;
• wills, especially for countries with forced heir-ship rules;
• to provide pensions for of employees;
• to facilitate trade.
   

H.  ADVANTAGES OF CYPRUS INTERNATIONAL TRUSTS

• The favourable legal system which is pertinent to International Trusts
• Cyprus International Trusts are not subject to exchange control. The absence of exchange control restrictions, and the availability of exceptional telecommunications and international banking services, make Cyprus a well located base for the remittance and transfer of funds
• This provision of the Law, which permits change of the law of the International Trust, ensures flexibility which might be important in the event that a change in government fiscal or other policy makes it beneficial to change the location of a trust
• The Law imposes on any of the Trustees or any other person, including government officials and officers of the Central Bank of Cyprus, the duty of confidentiality on all matters pertaining to the International Trust, thereby safeguarding the anonymity of the Settlor or the Beneficiary.
• No tax is payable on any income derived by the International Trust
• There are no reporting or registration requirements pertinent to Cyprus International Trusts
• Cyprus International Trusts may be used as asset protection vehicles.