CYPRUS [Financially oriented trusts]
From the Venetian domination during the sixteenth century, Cyprus came under the Turkish dominion until 1878, to be then “rented” for 99 years and at a later stage annexed to the British during the World War II. The British exploited it as a military and strategic base as part of their colonial expansion. Since 1974, Cyprus is divided into two by a “green line“: the Republic of Cyprus on a side and the Turkish Republic of Northern Cyprus (recognized only by Turkey) on the other. Thanks to its entry into the European Union (2004) and especially with the opening of financial markets, Cyprus has seen significant improvements in its economy. Offshore activities and tourism are their cornerstones. Independent State on 1960, when it became part of the U.N., Cyprus is a member of the Commonwealth since 1961.
Definitely hit by the Greek crisis, the Cypriot banking system has undergone a profound crisis in 2013 and only with the financial help of the Eurogroup, Cyprus was able to withstand a clash that could have proven to be extremely dangerous for the real economy. “Minor transit point for heroin and hashish via air routes and container traffic to Europe, especially from Lebanon and Turkey; some cocaine transits as well; despite a strengthening of anti-money-laundering legislation, remains vulnerable to money laundering; reporting of suspicious transactions in offshore sector remains weak (2008)” as reported on the CIA Factbook database. The International Trusts Law was first issued in 1992 (amended in 2012); trusts are not taxed under Cyprus tax law.
International trusts and taxes:
In fact, Cyprus Offshore Trusts enjoy important tax advantages, providing significant tax planning alternatives to potential investors. All dividends, interest incomes, capital gains, inheritances whether while trading or otherwise, of an Offshore Trust, (so assuming it is a trust whose property is located and income is derived from outside Cyprus) are not taxable, nor subject to withholding tax. A ‘non-Cypriot” who wishes to create an Offshore Trust in Cyprus with the intent to retire there could be exempted from taxation if all the earned income and all the assets are settled abroad, then he / she can be appointed as beneficiary of the trust.
“There are no registration on reporting requirements for Trusts established in Cyprus nor are the names of the Trust or of the persons referred to in the Trust Deed disclosed. The only authority to be informed of the creation of an Offshore Trust is the Central Bank and only in case where the Offshore Trust owns shares in a Cyprus offshore company”. The settlor may even reserve to himself some rights in place of the full discretion of the trustee, following the example of the most adjourned offshore trust laws.