“Cyprus already has a strong foundation, no pun intended, in private client structuring, particularly through the use of the Cyprus International Trust regime, which is widely recognised as robust, flexible, and commercially practical. However, the global private wealth landscape has evolved significantly,” expert Nicky Xenofontos suggests.
Speaking exclusively to CBN, the lawyer, Trust and Estate Practitioner (TEP), Chair of STEP Cyprus, Deputy Chair of STEP Europe and Vice President of the Cyprus Bar Association’s Trusts Committee, continues, “Today’s internationally mobile clients, particularly from civil law jurisdictions, the Middle East, and parts of Asia, are often more familiar and comfortable with foundation structures than trusts. Without a modern, fully-fledged foundation regime, Cyprus is effectively limiting its addressable market.”
Xenofontos points out that introducing a comprehensive Foundations Law would be a strategic upgrade for Cyprus, explaining that it would, “broaden client accessibility by catering to civil law clients who may not conceptually align with trusts, enhance structuring flexibility, allowing advisors to tailor solutions more precisely to family governance, succession, and asset protection needs, increase competitiveness vis-à-vis jurisdictions such as Liechtenstein, Switzerland, Luxembourg, and even the UAE and strengthen Cyprus’ positioning as a full-service private wealth hub, rather than a “trust-only” jurisdiction.”
As the expert underlines, “Importantly, this is not theoretical. A foundations law bill has already been prepared by the Cyprus STEP Branch, with the invaluable assistance and guidance from the STEP Worldwide Chair, Mr Paolo Panico, and former STEP Cyprus Chair, Mrs Stella Kammitsi, and ready to be placed on the parliamentary agenda. This reflects a coordinated effort between industry bodies and policymakers to modernise Cyprus’ offering.”
The conceptual distinction between a trust and a foundation
Asked to outline some of the basic differences between a trust and a foundation and what she considers to be the main reasons a foundation may be a more attractive option compared to a trust for some clients, Xenofontos explains that, “At a high level, the distinction is conceptual.”
“A trust is a private legal arrangement, a relationship between the individual creating the trust (settlor) and the trustee who holds assets (trust property) for the benefit of third persons (beneficiaries). A trust does not have a separate legal personality, unlike a company, for example,” she elaborates, going on to explain, “A foundation is a legal entity, it has a separate legal personality, it owns assets in its own name and operates through its governing bodies.”
This, Xenofontos clarifies, means that the difference has practical implications.
“A foundation may be more attractive where clients prefer legal personality and corporate-style governance (boards, councils, statutes), where civil law familiarity is key, as foundations are more intuitive than trusts in those systems, where greater control mechanisms are desired, particularly through founders’ rights or reserved powers (subject, of course, to proper structuring, legal and tax advice), where succession planning needs to be institutionalised, rather than discretionary in nature, and where philanthropic or legacy objectives are central,” she elaborates.
The expert continues that, “Trusts remain extremely powerful, particularly discretionary trusts, but foundations provide an alternative that complements, rather than replaces, the existing toolkit.”
As Xenofontonos explains, “A trust will often be preferable where maximum flexibility is required, particularly through fully discretionary structures, allowing trustees to adapt to changing family circumstances, tax environments, or geopolitical risks and where asset protection is a primary objective, given the well-established body of common law principles supporting firewall provisions and the separation of legal and beneficial ownership.”
Also, she pointed out, where “Confidentiality is important, as trusts, unlike foundations, do not have legal personality and typically operate with a lower public disclosure footprint. In Cyprus, while trusts are subject to transparency requirements through the CySec maintained Trust Beneficial Ownership Register, this is not publicly accessible. Any third-party seeking information must submit a formal application, demonstrate a legitimate interest, and the trustees are notified and given the opportunity to make representations before any disclosure is considered.”
The goal for Cyprus to offer both trusts and foundations seamlessly
In addition, a trust will also often be preferable where, “Sophisticated succession planning is needed, especially for multi-generational families where staggered or conditional distributions are desirable, where tax neutrality or efficiency is sought, particularly in cross-border planning where trusts are already recognised and tested in many jurisdictions, where professional, independent stewardship is preferred, with trustees exercising fiduciary duties and discretion, reducing the risks associated with founder/control dynamics, and where complex family dynamics exist, where discretion, trustee independency and impartiality can mitigate conflict and avoid rigid entitlements.”
“In contrast to foundations, which can sometimes introduce elements of formality or perceived control, trusts offer a highly adaptable, time-tested structure that remains the cornerstone of international wealth planning,” the expert goes on to note, elaborating that, “In foundation structures, it is common for family members to sit on the board or council, which, while attractive from a control perspective, can in practice lead to conflicts of interest, family friction, and challenges to independent decision-making. By contrast, trusts are typically administered by licensed, regulated professional trustees, who are bound by strict fiduciary duties to act impartially and in the best interests of the beneficiaries, thereby ensuring objectivity, continuity, and professional stewardship.”
“For a sophisticated jurisdiction like Cyprus, the goal is not to choose between the two, but to offer both seamlessly,” she underlines.
A holistic and legislative-driven approach for Cyprus
When it comes to other countries that already provide full trust and foundation services and what she believes it would take for Cyprus to be in a position to compete with them, as well as what are some of the next steps that would need to be taken to this end and to what extent will STEP Cyprus be involved, Xenofontos explains, “Jurisdictions such as Liechtenstein, Switzerland, Luxembourg, the Netherlands, and Panama already offer both trust and foundation structures as part of a comprehensive private wealth ecosystem. Increasingly, we are also seeing jurisdictions like the UAE positioning themselves aggressively in this space.
For Cyprus to compete effectively, the approach must be holistic and legislative-driven, not incremental.”
She continues that three key pillars are currently being advanced, explaining that these include “Foundations Law (Ready), A modern Foundations Law is already drafted and ready to be introduced to Parliament. This is a critical missing piece in the Cyprus offering.”
The next pillar is Global Representative Power, on which the expert notes, “Modern wealth planning increasingly requires tools that operate effectively across borders. This is precisely where initiatives such as the STEP Global Representative Power become highly relevant.”
Xenofontos explains that, “The GRP is designed as a globally recognised, portable model for powers of representation, addressing the current fragmentation of incapacity laws and enabling individuals to plan seamlessly for cross-border scenarios. The GRP is a template and a benchmark for a lasting/enduring power of attorney that is globally recognised and portable across borders. It serves as a model ‘best-practice’ template to governments globally when developing new legislation or reviewing existing provisions.
The purpose of this GRP is to ensure that a person’s chosen representative can manage their affairs (health, welfare, and finances) across different countries without complex, repetitive legal procedures.”
As the expert notes, “For Cyprus, adopting a legislative framework aligned with the GRP would be a natural extension of its private client offering, complementing trusts and future foundations by ensuring that individuals can also plan for incapacity in a consistent, internationally recognised manner, something that is currently fragmented or absent in many jurisdictions. And the best part? Cyprus will be the first EU country to adopt this and will be a pioneer!”
The third pillar is Cyprus International Trust Law Enhancements. On this, Xenofontos notes that, “At the same time, we are strengthening - not replacing, one of Cyprus’ most successful legal products.”
She notes that “Amendments to the Cyprus International Trusts Law have already been prepared by the Trusts Committee of the Cyprus Bar Association, of which I serve as Vice President, and have been submitted to the Parliamentary Legal Committee. These updates form part of a deliberate effort to ensure that the Cyprus trust regime remains at the forefront of international practice.”
Xenofontos explains that the proposed amendments aim to, “Modernise the legislative framework in line with global best practice, ensuring it remains compatible with evolving cross-border structuring needs, enhance legal certainty and operational efficiency, providing clarity to trustees, advisors, and counterparties and facilitating smoother administration and, reinforce Cyprus’ reputation as a jurisdiction of substance and credibility, particularly in an environment where governance, transparency, and regulatory robustness are under increasing scrutiny.”
The expert notes that these reforms build on an already strong foundation of Cyprus trust law, “including flexibility in reserved powers, strong asset protection features, and recognition of purpose and charitable trusts (including for education, health, and broader public benefit purposes) while ensuring the regime remains future-proof and internationally competitive.”
Cyprus as an inflection point
As Xenofontos underlines, “Cyprus is no longer a 'promising' private client jurisdiction - it is at an inflection point. The fundamentals are already in place:A sophisticated common law legal system, a deep pool of high-calibre professional services, a strategic gateway position between Europe, the Middle East, and Asia, and full EU membership with regulatory credibility.”
“What is happening now,” she continues, “is not incremental reform, it is a deliberate repositioning. Through the introduction of a Foundations Law, targeted enhancements to the Cyprus International Trusts regime, and forward-looking initiatives such as the Global Representative Power, Cyprus is actively transitioning from a strong regional player to a fully-fledged international wealth structuring hub.”
“If these initiatives are implemented with the necessary speed and conviction, Cyprus will not be competing on price or convenience,” the expert continues, pointing out, “ It will be competing on quality, sophistication, and credibility. And at that point, the question will no longer be whether Cyprus is an alternative jurisdiction—but why it isn’t the first choice.”
