Cyprus International Trusts: Wealth protection and peace of mind
Simona Maria Ciurla & Rebecca Ephgrave 10:16 - 14 September 2023
Wealth can be slow to grow and, if you do not take care of it, quick to shrink. Protecting hard-earned wealth is not always easy: family disputes, political change, business challenges, high taxation or risky investment decisions are among the many factors that can diminish a family’s assets.
Setting up a trust can be a highly effective way for High Net Worth Individuals (HNWIs) and families to make sure their assets are used to support current and future generations in a way that gives them comfort. Whether the aim is to ensure that the assets are used for educational or charitable purposes or to hold property for a minor until they reach adulthood, a trust structure provides a tried and tested framework for implementing clear and efficient succession plans. A trust can also be a tax-efficient structure, reducing unnecessary costs and helping wealth grow organically.
Fundamentally, a trust puts protective structures around wealth, ensuring that the assets are managed by independent trustees in the family’s best interests. A well-structured trust helps grow wealth and defends it against unfounded claims that can arise from creditors or family disputes.
With so much at stake, it is essential to carefully consider the role of trustee. This is an important long-term relationship, requiring the highest level of confidence, integrity, and professionalism.
The importance of choosing the right trustee
Appointing the right trustee to effectively oversee and take care of the trust over its lifetime is a delicate but important decision to make.
As a first step, it is essential for any HNWI or family to have a clear perspective on what it is that they are trying to achieve in the long term, which is usually to protect and grow their hard-earned wealth so that they can provide for their children, grandchildren and, perhaps, other causes that may be close to their hearts. A clear vision is the foundation on which a successful structure is built.
Secondly, the process to evaluate potential trustees should be detailed, it should analyse and compare various options and, most importantly, should not be rushed. Investing time upfront to make the right decision is much better than realising further down the line that a mistake has been made. HNWIs and families need to appoint a knowledgeable, experienced, financially responsible, independent and reliable trustee who can manage a robust structure for the long term and with whom they can build a trusted relationship.
Cyprus International Trusts
Cyprus is known for its relaxed Mediterranean lifestyle, high-income economy and stable government. It is also a prime financial centre and business hub in the Mediterranean, with a well-established legal system, attractive tax regime and a highly qualified and multilingual labour force.
Cyprus’ legal framework is based on English common law and its trusts legislation combines many of the key features of other top-tier trust jurisdictions worldwide, creating a very solid foundation for the formation of Cyprus International Trusts (CITs). CITs have become an increasingly popular vehicle among international HNWIs and families for asset protection, tax planning and succession planning. Cyprus’ trust legislation includes robust confidentiality protection and asset protection provisions and also permits a trust settlor to reserve certain powers.
CITs enjoy a number of tax benefits, including the following:
- Income, gains and profits from non-Cyprus sources are exempt from income tax, capital gains tax, special defence contribution or any other taxes in Cyprus.
- Worldwide income, profit and gains are taxable in Cyprus only where the beneficiary is a Cyprus tax resident.
- Beneficiaries who are non-residents of Cyprus are taxed only on Cyprus-sourced income in accordance with Cyprus income tax laws.
- Dividends received by a CIT are not taxable and not subject to any withholding tax in Cyprus.
- There is no estate tax on CITs.
CITs also fall within the scope of double tax treaties, provided that the other contracting country recognises trust structures and principles of equity, and the trust itself meets the eligibility criteria set out in the relevant treaty.
Beyond the legal and tax considerations, HNW families have been choosing Cyprus as a preferred jurisdiction for their trusts for additional reasons. Cyprus offers a stable economy, supported by sectors such as tourism, real estate and renewable energy. The country’s high quality of life, pleasant climate and rich cultural heritage further add to its appeal. Situated at the crossroads of Europe, Asia and Africa, Cyprus has for centuries been a strategic platform from which to travel to other countries and is an easy trip from the UK, the EU or the Middle East. Moreover, yacht owners can enjoy several fully equipped marinas built using the state-of-the-art technologies.
In short, CITs provide a solid legal basis for the protection of family wealth and individuals can also take advantage of Cyprus’ highly tax-efficient environment and excellent quality of life.
How the right services can assist
Trident Trust has been establishing and administering corporate and trust structures for more than 40 years. As a highly experienced independent trustee, we work with legal advisors and other professionals to set up and administer bespoke trusts on behalf of international individuals and families, in line with the wishes and requirements of the trust settlor.
A well-structured and administered trust, managed by a regulated and professional trustee, offers real peace of mind. It means that your assets are well-protected and only ever used in the way you want, giving your family one less thing to worry about.
If you would like to learn more about Cyprus International Trusts or our fiduciary services, contact Simona Maria Ciurla (email@example.com) or Rebecca Ephgrave (firstname.lastname@example.org) of our Cyprus Client Relationship Management team.
By Simona Maria Ciurla, Assistant Manager, and Rebecca Ephgrave, Manager Client Services, Trident Trust
(This article was first published in The Cyprus Journal of Wealth Management. To view it, click here)