On 23 March 2012, the International Trust (Amending) Law of 2012 came into effect after the Cyprus House of Representatives passed a reform of the International Trusts Law of 1992. A year later, the Parliament approved a bill providing for the creation of a Trust Registry, which will be maintained by the relevant supervisory authorities regulating the Fiduciary Companies and Law Firms. The Trust Registry does not contain information on the beneficiaries and/or the settlor; it only contains information relating to the name of the trust, the details of the trustees, date of creation and date of termination (if applicable) of the trust.
The advantages of the use of CITs are many, some of which include tax benefits such as exemption from income tax, capital gains tax and estate duty. CITs provide protection of assets from risks arising in tort, contract or otherwise in relation to transactions entered into by the settlor. It is important to note that there are no reporting requirements and that the confidentiality of the persons involved is safeguarded.
The recent amendments have further reinforced the advantages offered by the formation of CITs. The key features relate to changes concerning:
- Residency provisions: whereas with the previous law it was prohibited, now both settlor and beneficiary can be Cyprus residents, provided that they are not Cyprus residents the calendar year preceding the formation of the CIT.
- The trustee’s powers to invest both in movable and immovable property was limited. With the amending law, trustees can now invest both in movable property such as shares in a Cyprus company and immovable property both in and outside Cyprus.
- The trust’s duration: with the amendment law, the prescribed duration of 100 years has been altered with no limit on the period of validity, unless provided otherwise with the terms of the trust.
- With the amending law, the settlor’s powers are extended whereby the settlor can reserve powers to himself, retain a beneficial interest in the trust property, act as protector or enforcer of the CIT, appoint, remove any trustee etc.
- Changes in relation to the definition of “charitable purposes” has broadened the definition of “charitable trusts”.
- The applicable law after the amending law can be selected by the settlor, without limitation, all issues concerning the CIT will be governed by Cyprus law.
The amending law ensures that settlors and beneficiaries enjoy the highest possible degree of protection, due to the new provisions and the clarification of any ambiguities. The amendments give Cyprus the most updated and favourable trust regime and reinforce the position of Cyprus as an ideal trust jurisdiction within the EU.