Cyprus International Trust: A Step-by- Step Guide for High-Net-Worth Individuals

What is a Trust?

A trust is a legal arrangement, established in writing, between three key parties:

• The Settlor: The individual or entity who owns the assets and establishes the trust.
• The Trustee: The appointed entity or person responsible for managing the trust assets.
• The Beneficiaries: The individuals or entities who benefit from the trust.

For a trust to be valid, three essential conditions must be met:

• Certainty of Intention – The settlor must clearly express his/her intent to create the trust.
• Certainty of Object – The beneficiaries must be clearly identifiable.
• Certainty of Subject Matter – The assets within the trust must be defined.

If any of these certainties are absent, the trust may be deemed invalid.

Cyprus International Trust (CIT)

The Cyprus International Trusts Law, enacted in 1992 and further amended in 2012 and 2013, governs the establishment and operation of international trusts in Cyprus. This legal framework makes CITs one of the most attractive asset protection and wealth management tools globally.

Key Features of a Cyprus International Trust:

• The Trust Deed is the primary document outlining the terms and conditions of the trust.
• A Protector may be appointed to oversee and restrict certain actions of the Trustee, ensuring the Settlor’s wishes are upheld.
• The Trustee manages the trust’s assets in the best interests of the Beneficiaries.

Conditions for a Valid CIT:

• The Settlor and Beneficiaries must not be tax residents of Cyprus in the year preceding the creation of the trust.
• After establishing the trust, Settlors can relocate to Cyprus, and Beneficiaries do not need to remain non-residents.
• At least one Trustee must be a Cyprus tax resident throughout the trust’s duration.

Asset Protection in Cyprus International Trusts

One of the primary advantages of a Cyprus International Trust is asset protection. The assets within a CIT are safeguarded against:

• Bankruptcy or Liquidation: Creditors cannot claim assets unless they can prove fraudulent intent in transferring assets to the trust.
• Legal Actions: A claim can only be made within two years from the date of the trust’s creation.

These provisions make CITs an ideal tool for wealth preservation and succession planning.

Tax Benefits of a Cyprus International Trust

Taxation of a CIT depends on the residency of the Beneficiaries:

• If the Beneficiary is a Cyprus tax resident, income from both Cyprus and international sources is taxable.
• If the Beneficiary is NOT a Cyprus tax resident, only Cyprus-sourced income is taxable, excluding dividends and interest.
• No Capital Gains Tax applies on the disposal of non-Cypriot real estate assets held by the trust.
• No Withholding Tax applies on dividends paid to non-resident Beneficiaries.

These tax advantages make CITs a preferred structure for high-net-worth individuals (HNWIs) and businesses looking for a tax-efficient wealth management solution.

Purpose of a Cyprus International Trust

A Cyprus International Trust is an excellent vehicle for:

• Inheritance and Succession Planning – Ensuring wealth is smoothly transferred to future generations.
• Asset Protection – Shielding assets from creditors, legal claims, and political instability.
• Tax Planning – Maximizing tax efficiency for international business structures and personal wealth.
• Business Structuring – Holding international business assets while benefiting from Cyprus’s legal and tax framework.

Our Legal Services for Cyprus International Trusts

At Spencer West Cyprus we provide comprehensive legal services related to Cyprus International Trusts, including:

• Trust Formation & Legal Advisory – Assisting with the creation of a CIT and drafting all necessary documentation.
• Trustee Services & Management – Establishing trustee companies and ensuring compliance with regulations.
• Ongoing Legal Support – Advising on trustee powers, beneficiary rights, and any related trust matters.

Why Choose Cyprus for Your International Trust?

• Strong Legal Framework based on common law principles.
• Robust Asset Protection provisions against creditors.
• Attractive Tax Benefits for international clients.
• Strategic Location within the European Union.

With its favourable trust laws, confidentiality, and asset protection benefits, Cyprus is a leading jurisdiction for international trusts.

For more information on setting up Cyprus International Trust, please do not hesitate to contact Mr. Theo Antoniou, Founding Partner at Spencer West Cyprus at theo.antoniou@spencer-west.com or info@spencer-west.com