Tax benefits of Cyprus Trusts

In order to become a modern and prestigious financial center and trust territory, Cyprus has established the so called “Cyprus International Trusts” (“CIT”), which have the following features:

  • The “settlor” and the beneficiaries must not be permanent residents of Cyprus, however they may become residents after the creation of the trust.
  • The “trustee or at least one of the “trustees must be a resident of Cyprus during the whole duration of the trust.
  • Cyprus has several kinds of trusts and, unlike other jurisdictions, it allows the creation of “Charitable Trusts” to achieve philanthropic goals such as the eradication of poverty, the advancement of science, arts, sports, culture and religion, protection of animals among other.

In regard to taxation, the CIT offer the following advantages:

  • Income, profits and benefits from foreign sources are exempted from paying taxes in Cyprus. However, said income may be taxed when the beneficiary is a tax resident in Cyprus, and, when the income has a local source according to the tax laws of Cyprus even if the beneficiaries are not tax residents in Cyprus.
  • Dividends, interests and capital gains received by a CIT of a Cyprian company are not taxed nor are they subject to withholding.
  • When the CIT is created as an estate planning method, is not subject to estate tax in Cyprus.

On the other hand, before complying with the European regulations relating to money laundering, a Trust Registry will be created which will record the information of the settlor, the beneficiaries and the trustee. However, access to these records will be limited to certain public entities in order to preserve confidentiality.

Image: Idella Maeland

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