Formation of Trusts & Foundations




The basic law which regulates International Trusts in Cyprus is the International Trusts Law 69(I)92 (the “Law”), which was enacted in July 1992. A Trust is created by an individual or a company called “the settlor”, who transfers certain assets to a ‘person’, which can be either an individual or a company called “the trustee”, which agrees to hold the assets, “the trust fund”, for the benefit of another person, “the beneficiary”. The assets are held by the trustee on the terms and powers vested to him listed in the Trust Deed.

It should be noted that the Trustees Law of 1955 Cap.193 continues to be in force and applies to International Trusts as well, except, in so far as they are inconsistent with or have been modified by the provisions of the International Trust Law (S.14(1) of the International Trusts Law of 1992). .

International Trust is defined under Section 2 of the International Trust Law. It refers to a trust in respect of which: .

  • The settlor is not a permanent resident in the Republic
  • at least one of the Trustees for the time being is a permanent resident of the Republic
  • none of the beneficiaries, other than a charitable institution, is not a permanent resident of the Republic, and
  • the trust property does not include any immovable property situated in the Republic


Another important aspect of establishing an International Trust in Cyprus is that as expressly provided under section 3(2) of the Law, the trust “shall not be void or voidable in the event of the settlor’s bankruptcy or liquidation or in any action or proceedings against the settlor…” The law goes on and states that consideration should not be given to the fact the trust is being made for the benefit of the settlor himself, his spouse or to his children.

The only situation where a trust can be held void is when it is proven to the satisfaction of the Court that the international trust was made with the intent to defraud the creditors of the settlor at the time when the payment or transfer of assets was made to the trust. The burden of proof to establish intent to defraud lies with any creditor seeking to annul the Trust. Section 3(3) of the Law, states that such action must be initiated within two years following the transfer or disposal of assets to the Trust.

The above provision renders Cyprus as an “asset protection trust heaven”. Trust assets are protected against creditors and also the legislation effectively limits the time period during which a claim can be taken in Court. The two year time frame for claims specified under section 3(3) provides for additional security with regard to the assets. From the moment the assets are transferred to the trust, this immediately triggers the two year limitation period.


Confidentiality is a major aspect of the Cyprus International Trust. Section 11(1) of the Law states that the trustee or any other person including officers of the government and officials of the Central Bank of Cyprus cannot disclose to any person who has no right by law to know any documents or information which relates to the International Trust.

Confidentiality is also safeguarded from the mere fact that International Trusts are exempt from any obligation of registration (section 15 of the Law). There is also no obligation to submit tax declarations or financial statements.


Section 12 of the International Trusts Las provides that the income and profits of an International Trust derived or deemed to be derived from sources outside Cyprus, are completely exempted from any tax imposed in Cyprus, such as capital gains or special contribution for defence. Any trust income received by the trustee from a business company abroad such as interest or dividends is therefore exempt from income tax.

Also no estate duty is chargeable in respect of assets belonging to an International Trust. In fact, as Section 12(2) of the Law stipulates, the only fee payable to the Cypriot Inland Revenue is a one-off stamp duty fixed at a rate of €427.50 payable when the trust documentation is executed.


Many countries have a ‘forced heirship’ law which governs how an individual’s assets shall be contributed to his relatives after his death. The Cyprus International Trust is a good way of overcoming ‘forced heirship’ and allows to the individual to distribute and decide for himself the proportions in which his assets will pass. Provision is made under section 3(1) of the 1992 Law which states that the inheritance law of Cyprus or of any other country shall in no way affect such transfer or disposition or otherwise affect the validity of such international trust.

Although there is no specific provision in statute which relates to the appointment of a protector, the usage of a protector into the trust instrument or/and the letter of wishes is something which is commonly used. The Trust’s Protector’s role is to add an additional layer of protection and is usually a person which is familiar with the settlor’s long term financial and personal goals.

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