A Cyprus International Trust in conjunction with Tax planning and business structure may result beneficial to wealthy individuals, their families or even entrepreneurs. Trusts have been created for different reasons such as, to reduce or minimise taxation, asset protection and alter the disposal of assets on the death of people. A Trust may include property (any kind of assets movable, immovable, cash shares etc) anywhere in the world.
According to section 8 of the 2012 Law, trustees have extensive investment powers, including holding, maintaining or investing in movable and immovable property in Cyprus and abroad, including shares in companies incorporated in Cyprus.
An International Trust may in certain cases be used to obtain benefits from an applicable double tax treaty. Also, it may provide asset protection where this is required. Thirdly and perhaps most importantly, International Trusts in Cyprus are exempt from income tax and any other form of tax since income and profits of International Trusts are derived or deemed to be derived from sources outside Cyprus.
Furthermore, Cyprus international trusts have complete freedom from all exchange control provisions. They are also allowed to participate in local business and investment, provided that all income arising from such sources is taxed at normal tax rates.
A Cyprus international trust may establish Cyprus IBC’s, International partnerships or even an international branch and consequently take advantage of the beneficial status available to such entities.
As with companies and partnerships, the residence of a trust plays a vital role on the way it will be assessed to tax. Some of the benefits of an international trust which were stated above, will be lost if the international trust is also deemed resident in a high tax jurisdiction with which Cyprus does not have a favourable double tax treaty.
Taking the UK as an example, according to sections 110, 111 and 151 of the Finance Act 1989, a trust will be deemed resident in the UK if one of the trustees is a UK resident, unless, at the time of the making of the trust, the settlor was neither resident, ordinarily resident, nor domiciled in the UK. If initially, a trust is not deemed resident in the UK due to the settlor being neither resident, ordinarily resident or domiciled in the UK, it may later become so resident if the settlor provides funds for the trust at a time when he is resident, ordinarily resident or domiciled in the UK.
The theory behind international trusts, is that, for settlors resident in high taxation jurisdictions it is possible to minimise their taxation on income or wealth by transferring property to a Cyprus International Trust.