The House of Representatives has approved the new Law on Cyprus International Trust which will be read together with the basic Law 69 (I Cap) of 1992. With the said amendments major new sections of the basic Law of International Trusts have been introduced in the definition of Cyprus International Trusts.
“International Trust” means a trust in which:
(a) the settlor, whether physical or legal person is not resident of the Republic during the calendar year proceeding the year of the creation of the trust;
(b) one at least of the trustees during the whole duration of the trust is resident of the Republic;
(c) None of the beneficiaries whether physical or legal person with the exception of charity, are residents of the Republic during the calendar year preceding the year of the creation of the trust.
“Resident of the Republic” will be defined according to the Taxation Laws of the Republic of Cyprus.
The validity of the trust does not cease to be an international trust for the reason only that the settlor or the trustee or one or more of the beneficiaries is a partnership or a limited liability company.
“Trustee” means a legal or physical person who owns or to whom it has been transferred or holds or it is about to be transferred to him the possession or to be transferred to him property of the trust to be held:
(a) in trust for a beneficiary not withstanding whether the trustee is also the beneficiary of the trust; and/or
(b) for any other purpose not exclusively for the benefit of the trustee.
“disposal” means any disposal or number of disposals taking place by any means which includes any transaction, gift, allowance or transfer of property of any nature.
“beneficiary” means legal or physical person including an unborn person at the time of the creation of the trust or a part of a class of persons who have the right or interest to the property which is subject to the trust.
“right to inherit” means any right claim or interest which is created according to the Law of any jurisdiction other than the jurisdiction of the Republic in relation to or against the property of any person which is created, which is the result or is established as a result or in contemplation of death of a person with the exception of the right, claim or interest which is created by will or which is the result from any other willful disposal of this person or which is the result from an expressed limitation in the inheritance of property for this specific person.
“creditor” means any legal or physical person or persons to whom the settlor owns a debt or has other commitments at the time of the creation of the trust or at the transfer of property to the trust.
“settlor” means physical or legal person who transfers property to the trust or makes a disposition which results as a will under the terms of trust or to a trust.
“protector” means a person other than the trustee to whom powers of any nature are assigned from the trust deed including the power to advise the trustee in relation to the execution of his powers or in relation to the right of the trustee to consent or veto and includes the right of appointment or removal of the trustee.
“intention to defraud” means the intention of a settlor to avoid fraudulently the obligations which are owned to a creditor.
“obligation” means debt or obligation which existed on or prior to the date that the said transfer and such obligation was known to the person who made the transfer.
“trust property” means property which is held at any given time by the Trust.
“nominator” means person or persons whose duties are to ensure for proper the operation of the International Trust is created for non charitable purposes.
THE TRUST DEED
A Trust is not a legal entity but an agreement between the Settlor and Trustee and his duties and responsibilities can be found in the Trust Deed and the Law itself.
The Trust is not recognized as a legal person in any Double Tax Treaty and Trusts in order to benefit from the provisions of any Double Tax Treaty must create Limited Liability Companies for participating in Joint Venture agreements, trading, holding Intellectual Property Rights etc.
CYPRUS TRUST POSSIBILITIES
Therefore, considering the location of Cyprus, being in the crossroads of Europe, Asia and Africa, and member of the EU coupled with the above advantages, one may conclude that Cyprus is an ideal trust jurisdiction.
The powers and authorizations which are given by the provisions of this Law to the trustee, protector, settlor and nominator respectively are additional to the powers and authorizations which may have been given by the terms of the international trust deed and the powers and authorizations of the Law apply only if and when there are no contrary provisions to the terms of the trust; and are subject to its terms.
Subject to the Trust Deed all matters which arise in relation with the international trust or any transfer of property to such trust including without limitation matters in relation to:
(a) the validity, interpretation or the result of any settlement or disposal or any of its amendment
(b) the validity of a result of any transfer or other disposal of property to the trust
(c) the management of the trust whether this is carried out in the Republic or outside the Republic including matters relating to the operations, appointment or removal of trustees, protector and nominators supervising the trust
(d) the existence and the extend of operation in relation to the trust including without limitation the right to amend, recall , appointments and the validity of the exercise of such operations
(e) the powers, responsibilities, obligations, duties of the trustees, protectors , nominations for the operation of the trust or in relation with the responsibilities or rights of the trustees, protectors or nominators supervising the trust
will be determined according to the Laws of the Republic without reference to the Law of any other country provided that the Law applicable in the Republic or in any other country in relation to the succession inheritance, it does not affect in any other way according to the above, the transfer or disposal or validity of the international trust.
The Cyprus Trustee Law was amended recently in order to bring it into line with the other offshore jurisdictions.
With the newly introduced amendments of the Trustee Law it is provided that no Cyprus International Trust and no settlement in the Trust, or transfer, or disposal to the Trust will be void, voidable or subject to be set aside and in no way such transfer will be challenged or the ability of any Settlor, Trustee, Nominator, Protector, Beneficiary of the Trust can be challenged and cannot be deprived of any right, claim or interest due to the reason of:
a) the Law applicable in the foreign jurisdictions prohibits or does not recognises or does not accepts the concept of the Trusts.
b) The Trust or disposal renders void or annuls or cancels or extinguishes or may cancel or extinguish rights, claims, interests, obligations or responsibilities which arise or are imposed by legal principles of any jurisdiction or any such person, because:
i) of personal relationship with the Settlor or Beneficiary etc. or because of the inheritance rights; or
ii) it is contrary or may be contrary with any Law or any Court, or administrative judgment, court Order or action in any other jurisdiction whose intension is to recognize, protect, execute or perfect any of those rights.
The protector of the Trust has wide powers given by Law, which includes the power to advise the Trustees in the execution of his duties and it gives him the right of veto the acts of the trustees which includes the power of appointment and removal of the trustee.
The authorities and powers given to the Trustee, the Protector of the Trust and the Nominator are additional to these given in the Trust Deed.
Furthermore amendments of the Cyprus Trustee Law has introduced provisions relating to:
a) the validity, interpretation or result of the Trust;
b) the validity or the result of any settlement, or transfer, or disposal in the Trust, the management of the Trust whether this is in the Republic or outside of the Republic with a respect to the management, or appointment of the Trustees, or Nominator.
The amendment of such Trust and limitation of such powers or the recall of such activities and the duties, responsibilities, obligations and the powers of the Trustees, Protectors or Nominators of the Trust in relation to the operation of the Trust will be determined according to the Law of the Republic of Cyprus without reference to the Law applicable in any other foreign jurisdiction.
The applicable Law in Cyprus or in any other country in relation to the Inheritance and Succession Law will not affect in any way, according to the above, the disposal or validity of the International Trust.
POWERS OF THE SETTLOR
Notwithstanding the provisions of any other Law or Regulations, the Settlor may retain or the Settlor of the Trust may be granted any right or interest in the Trust fund or any of the below powers, whether such powers are retained by the Settlor or granted to the Settlor in his capacity as Protector of the Trust or Nominator of the Trust or otherwise will not in any way affect the validity of the Trust and may not hinder or delay the performance of the Trust. Such powers are the following:
a) the recalling , amendment of the terms of the Trust, or any other Trusts, or powers which result wholly or partially by the trust;
b) the disposal, distribution, payment or any other way of disposal of income or capital from the Trust Fund or giving instructions to reduce such disposal, distribution, payment or disposal;
c) to act as Director and give effective instructions in relation to the appointment and removal of Directors or any official of the Company wholly or partially owned to the Trust;
d) the giving of the effective instructions to the Trustees in relation to the purchase withholding, sale, management, lending, charging, pledging or mortgaging of any property of the Trust, or to exercise of any powers, or rights which will result in relation to such property;
e) the appointment or removal of any Trustee, Nominator, Protector or Beneficiary of the Trust;
f) the appointment or removal of any investment manager or administrator of a Fund;
g) the change of proper Law governing the Trust or change of forum of management of the Trust;
h) the limitation of any powers or discretions of the Trustee demanding that those are exercised only with the approval of the Settlor or any other person mentioned the Trust Deed.
Where such of the above duties have been maintained or transferred to the Settlor in his capacity as Protector, or Nominator of the Trust, the Trustee who acts upon such instructions and powers is not considered to be acting outside his duties and in breach of the Trust.
And where it is provided that powers which are retained by the Settlor, or who was given such powers as Protector or Nominator of the Trust will not give rise of the ground of an intention to defraud against the Settlor.
DURATION OF THE TRUST
Subject to the terms of the Trust, any International Trust which is created on or after the introduction of the new amendments of the Law, there is no limit as to the duration of the Trust which will be valid and binding and no legal principle or regulation which makes provision contrary continuity or existence, or investments, or any other authority or regulation will be implemented in a Trust or in any disposal, distribution, payment or transfer of property from the Trust.
Furthermore, unless there is a contrary provision to the terms of the Trust Deed no transfer, distribution, payment use or disposal of income or capital of the Trust to another Trust will not be voidable for the reason only that the other Trust continues to be valid and enforceable and after the date on which the validity of present Trust should be terminated.
a) the country where the Trust is managed;
b) the country where the assets of the Trust are found;
c) the country of residence of the Trustee;
d) the objects of the Trust and the countries where they will be performed.
Above provisions determine the applicable Law with the closest relationship to that of the jurisdiction of the Republic, and the applicability of the Law of the Republic is valid and conclusive irrespective of any other circumstances.
DISCLOSURE OF INFORMATION TO BENEFICIARIES
The Trustee will not provide any information or disclosure of the Accounts of the Trust to any Beneficiary unless he is of the opinion that such disclosure is necessary and is not a danger for the interests of the Trust.
The income and profit of an International Trust which are acquired or are considered to be acquired from sources within or outside of the Republic are subject to tax which is imposed in the Republic in the case of the Beneficiary who is resident of theRepublicofCyprus.
In the case of a Beneficiary who is not a resident of the Republic his income and profits of an International Trust which are acquired or considered to have been acquired from sources within the Republic are subject to tax which is applicable in the Republic.
Notwithstanding the provisions of the European Directive dated 22nd December 2000 for the international jurisdiction, the recognition and execution of legal and civil commercial cases the Court has jurisdiction in the cases of:
a) the applicable Law of the Trust or the relevant part of the Trust is the applicable is that of the Republic of Cyprus;
b) the Trustee of any Trust is resident of the Republic;
c) a Company acting as Trustee offering managing services if that is established in the Republic of Cyprus;
d) any assets of the Trust are found in the Republic of Cyprus;
e) the management of any settled property is managed in the Republic;
f) the parties agree to submit to the jurisdiction of the Cyprus Court;
g) the document which creates or established the Trust makes provision for reference of any disputes to the Court of Republic of Cyprus.
Such jurisdiction is exclusive unless the Trust Deed which creates or establishes the Trust makes different differences.
An international Trust which makes provision for choice of Law in favour of Cyprus jurisdiction the provision of this Law apply independently of any other provisions / regulations for conflict of Laws which are applicable in the Republic and the present provision makes the basic regulation and should be complied with as a matter of public policy.
With the amendment of the Law independent of the time that the Trusts are created its provisions do not invalidate any previous disposition or transfers.
The provision of the new Law do not in any way invalidates any earlier valid transfer or settlement.
DEMETRIOS A. DEMETRIADES LCC
Demetrios A. Demetriades LLC have vast experience in the creation of Cyprus International Trusts and including the preparation of the Trust Deeds, opening Bank Accounts for Trusts in Cyprus and abroad and its full operation and management through our Dadlaw Trustees Limited which is our Firm’s Company providing Trustee services to our Cyprus International Trusts.
We have made presentations at International Seminars for the promotion and the available incentives/ benefits in creating Cyprus International Trusts, the benefits and protection that may be derived from a structure involving Cyprus International Trusts and the other benefits such as anonymity and confidentiality which are enshrined by the Law.
For further information on this topic please contact Mr. Demetrios A. Demetriades at Demetrios A. Demetriades LLC, by telephone (+357 22 769000) or by fax (+357 22 769004) or by e-mail (email@example.com).
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.