1. What is a trust?
A trust is a three party fiduciary relationship whereby the first party (settlor or trustor) transfers a property to the second party (trustee) who holds it in trust for the benefit of the third party (beneficiary).
2. What is the purpose of setting up a trust?
Trusts are commonly used for tax planning purposes, privacy and asset protection. Moreover, there can be other advantages of creating a trust.
3. What are the different types of trusts?
There are several different types of trusts including Express Private Trusts, Resulting Trusts, Implied Trusts, Constructive Trusts , Charitable Trusts, Discretionary Trusts and Fixed Trusts.
4. What is the law related to trusts in Cyprus?
The Trustee Law of 1955 is the main statute law which governs trusts. Further, the International Trusts Law of 1992 governs international trusts.
5. What is an international trust?
An international trust is a trust whereby there is a minimum of one trustee that is resident in Cyprus at all times and neither the settlor nor any of the beneficiaries were residents in Cyprus for the tax year before the year the trust was created.
6. Is Cyprus or foreign law applicable to an international trust?
It depends on the terms of the trust. The trust could be governed by foreign law or Cypriot law provided that the laws of the foreign country where the trust was established allow that.
7. How long does it take to establish a trust and what are the costs involved?
A trust can be set up in just a few days. There is no stamp duty for setting up a Cyprus trust but there is stamp duty of 430 Euros for setting up an international trust. Fees for the creation and administration of the trust depend on the amount of work involved.
8. Are trusts registered?
The service providers (usually lawyers or accountants) who managed the procedure of setting up the trust must file the information of the trust to the relevant authority within 15 days from the date of creation of the trust. The competent authorities are the Cyprus Securities and Exchange Commission, the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus.
9. What information do the relevant authorities hold in regards to trusts?
The name of the trust and the trustee, the dates of establishment and terminations of the trust and the dates of any changes of the relevant laws relating to the trust.
10. What are the tax responsibilities of the trustees?
Trustees have to make returns to the Inland Revenue and pay taxes on the income of the trust. Moreover, they have to provide information in regards to the beneficiaries and trust accounts.
11. How can trusts be used for asset protection?
Trusts can be a very effective vehicle for asset protection. A trust is not voidable unless it can be proved in Court that the trust was established with the purpose of defrauding creditors. Any such Court action must take place within two years from the date of the transfer of the assets in question to the trust.
The Charitable Uses Act 1601 which can be used to cancel trusts created to hide assets from future creditors is not applicable in Cyprus. Further, Cyprus is not a signatory to other agreements which require British courts and other commonwealth jurisdictions to cooperate in insolvency cases. Furthermore, any questions in regards to the validity of an international trust are governed by Cyprus law and not foreign law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.