Cyprus International Trusts: A Robust Vehicle for Wealth Preservation and International Planning

As global families and high-net-worth individuals continue to seek effective solutions for wealth structuring, asset protection, and succession planning, the Cyprus International Trust (CIT) has emerged as one of the most attractive legal vehicles in Europe. With its roots in Common Law and robust statutory protections, the CIT combines flexibility, confidentiality, and tax efficiency in a single regime tailored for cross-border use.

Legal Framework

CITs are governed by the International Trusts Law No. 69(I)/1992, significantly enhanced by the 2012 amendments, and operate alongside the Trustees Law (Cap. 193)—which reflects the English Trustee Act 1925. Common Law and equity principles further supplement the legislative foundation. Importantly, Cyprus has ratified the Hague Convention on the Law Applicable to Trusts and on Their Recognition (Law No. 4(III)/2017), enhancing international enforceability.

CITs form a distinct category within the Cypriot trust ecosystem. Unlike local or foreign/offshore trusts, the CIT regime is exclusive in its application and offers a protective, standalone legal framework that overrides conflicting laws.

The Nature of a Trust

A trust separates legal ownership (held by the trustee) from beneficial ownership (held by the beneficiaries). This equitable structure, rooted in centuries-old English jurisprudence, ensures that trust property is managed fairly and according to the settlor’s intent. CITs can take various forms—express, discretionary, fixed, charitable, or purpose trusts—making them suitable for a wide array of personal and commercial arrangements.

Conditions for Establishing a CIT

To qualify as a CIT:

1. The settlor must not be a Cyprus resident in the calendar year preceding the trust’s creation.
2. The beneficiaries, excluding charitable institutions, must also be non-residents in that period.
3. At least one trustee must be a permanent resident of Cyprus throughout the trust’s duration.

 Residency is assessed under Cyprus Income Tax Law. Notably, the settlor or beneficiaries may become Cyprus residents after the trust’s establishment without compromising its validity.

Key Advantages

 1. Asset Protection

 CITs offer one of the strongest legal shields against creditor claims:

• Transfers are not voidable unless proven fraudulent.
• Creditors must challenge within two years of the transfer and bear the burden of proof.
• CITs bypass forced heirship rules, ensuring assets are distributed as per the settlor’s wishes.
• The strongest protection applies to assets located in Cyprus.

 2. Tax Efficiency

• No tax on income/gains from foreign sources if beneficiaries are non-residents.
• Beneficiaries residing in Cyprus can adopt non-domicile status for 17 years, exempting them from special defense contributions on dividends, interest, and rent.
• No withholding tax on trust distributions.
• No capital gains tax (except on Cyprus real estate).
• No inheritance or wealth tax.
• Low setup cost: a one-time stamp duty of €430.

3. Perpetual Duration and Flexibility

• No rule against perpetuities: CITs can last indefinitely.
• Default is irrevocability, though revocable trusts are possible if explicitly provided.
• The governing law can be changed, provided the new jurisdiction recognizes trusts.
• Terms can be amended by deed or court order if beneficial.

4. Confidentiality

• Trustees and protectors are bound by strict confidentiality.
• The Trusts Registry under the 5th AML Directive holds only limited data and is not publicly accessible—only parties with a legitimate interest can request access.

5. Management and Investment Freedom

• Trustees have broad investment discretion and can manage assets worldwide.
• CITs can accumulate income and invest as if they were absolute owners.

6. Practical Uses

• Family Wealth Planning: Multi-generational wealth protection and probate avoidance.
• Corporate Structuring: Holding Cyprus companies to leverage over 60 double tax treaties.
• Philanthropy: Establish charitable or purpose trusts with enforceable objectives.

Key Considerations

Foreign Jurisdictions

Certain jurisdictions may not recognize the protective elements of a CIT, especially when the trust holds foreign-located assets. It is advisable to structure the trust around Cyprus-based or trust-friendly jurisdictions to maximize enforceability.

Sham Trust Concerns

Excessive control by the settlor, particularly if retaining revocation or benefit powers, could risk the trust being deemed a sham. This can be mitigated by appointing a protector and adhering to the arm’s length principle.

EU Succession Regulation

Regulation 650/2012 may apply the succession law of the deceased’s last habitual residence. Structuring the trust with Cyprus public policy protections and considering the settlor’s residence in Cyprus prior to death may alleviate risks.

Compliance with Cap. 224

CITs can hold Cyprus immovable property, subject to compliance with the Immovable Property (Tenure, Registration and Valuation) Law, particularly in relation to ownership rights, title registration, and foreign ownership rules.

Trust Property: Broad and Flexible

The CIT regime allows inclusion of any movable or immovable property, situated anywhere, provided the trustee can legally hold and manage it. This includes:

• Real estate in Cyprus and abroad
• Shares and securities
• Bank accounts
• Intellectual property
• Art and collectibles

Trustees must have clear legal title, and any encumbrances must be resolved prior to transfer. There are no express asset-type restrictions, though practical limitations may arise under foreign law.

Steps to Establish a CIT

• Information Gathering: Settlor and beneficiary identities, trust duration, trustee powers, and investment intentions.
• Drafting the Trust Deed: With provisions on powers, confidentiality, revocability, and applicable law.
• Appointing Trustees: At least one Cyprus-resident trustee (usually a professional, such as a lawyer or accountant).
• Registration: Notify the relevant regulator with basic details (not a public registry).
• Pay Stamp Duty: Flat rate of €430.

Final Thoughts

The Cyprus International Trust remains a world-class legal instrument for clients seeking a combination of asset protection, tax advantages, confidentiality, and legal certainty.

If you are considering a trust-based strategy—whether for estate planning, international asset holding, or business succession—the CIT offers an unparalleled solution backed by a stable legal system and EU-compliant infrastructure.

Contact Phoebus, Christos Clerides & Associates LLC to explore how a Cyprus International Trust can be tailored to secure and enhance your wealth management strategy.