Trusts are widely used for the protection of assets. Cyprus introduced a competitive international trusts regime back in 1992 which was further amended in 2012.
Qualifications for Cyprus International Trusts (CITs)
- Minimum of the trustee who must be a Cyprus tax resident for the whole duration of the trust
- Settlor must not be a tax resident of Cyprus during the year preceding the year in which the trust is formed
- Beneficiaries must not be tax residents of Cyprus during the year preceding the year in which the trust is formed
- Trust property can include all kinds of assets situated anywhere in the world and it can comprise of real estate property located in Cyprus
- Certain powers may be reserved for the Settlor
Tax treatment of Cyprus International Trusts (CITs):
- Income, gains and profits deriving from non-Cyprus sources are exempt from income tax, capital gains tax special defence contribution or any other taxes in Cyprus
- Worldwide income, profit and gains are taxable in Cyprus only where the beneficiary is a Cyprus tax resident; beneficiaries who are non-residents of Cyprus are taxed only on Cyprus sourced income in accordance with the Cyprus income tax laws
- Dividends, interest or royalties received from a Cyprus International business company are not taxable and not subject to any with holding tax
- Trust capital received in Cyprus by a foreigner resident is not taxable on the trustee
- No estate duty in case a CIT was formed for the purpose of estate duty planning
- No inheritance tax in Cyprus
- The CIT may be used to distribute untaxed income in Cyprus to the beneficiaries, that is to say, family members
- CITs may last for an indefinite period and income may be accumulated without limitations
- Trustee is not assessed on the income or gains of the trust and is responsible for discharging the tax liabilities of the beneficiaries on their behalf
- Capital gains are applicable only from the disposal of real estate situated in Cyprus or shares of a company holding property situated only in Cyprus
Advantages and Benefits of CITs
Asset Protection
- CITs may be used to protect assets from risks arising in relation to transactions of the Settlor. CITs or a transfer of trust assets may only be set aside by the settlor’s creditors to the extent that it is proven to the satisfaction of the court that the CITs were made with the intent to defraud creditors.
Confidentiality and International Compliance
- Cyprus continues to offer robust confidentiality for trust structures. While registration of Cyprus International
- Trusts (CITs) is not publicly accessible, certain trusts must now be registered with the Beneficial Ownership Register operated by the Cyprus Securities and Exchange Commission (CySEC), in line with EU Anti-Money Laundering directives.
- These developments enhance international credibility and compliance, without undermining the private nature of CITs. Access to the Register remains restricted to competent authorities and is not open to the public.
- Nominee structures remain fully permissible, and trust documentation does not need to be disclosed publicly.
- Trustees must also comply with Common Reporting Standard (CRS) obligations. All Cyprus-based trusts—whether active or passive—are now required to complete a CRS questionnaire issued by the Cyprus Tax Department, ensuring alignment with global tax transparency standards.
Management of Family Wealth / Estate Planning
- The CITs are ideal for high net-worth individuals with somehow complicated family structures eg. Divorced spouses and children from different weddings
- CITs duration can be indefinite
- The Cyprus Law is the proper law of the CITs
- In Case the chosen law of the CITs is the law of Cyprus, then Cyprus is under an obligation to protect that trust. All questions relating to CITs is the law of Cyprus without reference to the law of any other jurisdiction, protecting against the application of foreign laws such as forced heirship laws.
Banking Solutions
- A bank account may be operated in the name of the trustee for and on behalf of the Trust
- Trustees, Settlor and Beneficiaries need to be clearly identified
- Beneficiaries may be easily amended, removed or appointed.
Taxation clarity
- Tax residence test applicable for determining the taxation of CITs. Beneficiaries’ tax residence determines tax treatment as local or international trust.
- Majority test applicable to determine tax treatment here having both resident and non-resident beneficiaries.
- CITs remain fully compliant with international tax reporting obligations, including CRS and FATCA, where applicable.
Our Services
We may assist in
The establishment of a Cyprus International Trust, advising on potential structures, and drafting all necessary legal documentation
The establishment of trustee companies and corporate protectors
The review, interpretation of existing trust deeds and the redomiciliation of foreign trust structures to Cyprus
The provision of trustee, administration, management and other related services Taxation clarity
