Parparinos Milonas has developed specialized knowledge in this field with regards to both the legalities involved and all necessary procedures.

Our Firm can provide either individual Trustees, who are usually qualified advocates, or a Corporate Trustee, through one of our subsidiary companies offering trustee services. It is also possible that a new company is set up specifically for this purpose tailored to the specific needs of the Settlor.

Reformation of the Cyprus International Trust Law

Cyprus has been recognized as the most modern and favourable trust regime in Europe

The International Trust (Amending) Law of 2012 came into effect on 23 March 2012, after the Cyprus House of Representatives passed into ruling the long-awaited reform of the International Trusts Law of 1992.

It was apparent that after 20 years of progression, the then modern state of the art international trust regime with its excellent protection features and tax mitigation, had somewhat fallen behind with numerous limitations and restrictions which were then included in the original law, were no longer found necessary.

The amending law has a number of changes of which are relatively technical, to the original law.  The key changes which have been made are outlined here below.

Provisions for Residence

Whilst attempting to restrict its application to Cypriots, the 1992 Law was unclear as to whether settlors could relocate to Cyprus after establishing a Cyprus International trust. This uncertainty is now clarified due to the amending law, by providing that the settlor is not a Cyprus tax resident only in the year preceding the year of creation of the trust. The prohibition on Cyprus tax resident beneficiaries and on ownership of immovable property in Cyprus is also removed by the amending law, therefore beneficiaries or settlors are able to take up residence in the Republic.

The Exclusion of Overseas Law

The amending law provides explicitly for the following provisions and further add to the already formidable asset protection features of the Cyprus International trust:

The validity of the international trust or any disposition or transfer of property to it, will not in any way be affected by the law relating to inheritance or succession in force in any other country or in the Republic of Cyprus.
The laws of Cyprus without reference to the law of any other jurisdiction will determine any question with regards to the validity or administration of an international trust or a disposition to an international trust.
The trustees’ fiduciary duties and powers are exclusively governed by Cyprus law so as are the duties and powers of any protectors of the trusts.
Dispositions to a trust may not be challenged on the grounds that they are inconsistent with the laws of another jurisdiction.  This is mainly important in the case of there being a challenge on the grounds and the other jurisdiction does not recognize the concept of trusts.

Duration of Trusts

Within the 1992 trust law, a restriction of a maximum of 100 years was in place and is now abolished due to the amending law. The amending law provides that, unless otherwise stated in the terms of the trust, there will be no limit on the period for which a trust may continue to be valid and therefore enforceable, and no rule against perpetuities or remoteness of vesting is applied to a trust or to any appointment, advancement, payment or application of income or capital from the trust.

Reserved powers and interests

The new amending law allows the settler of a trust to have the following options at hand:

Remove or appoint any trustee, beneficiary, protector or enforcer
Reserve powers to herself or himself
Retract, vary or amend the terms of the trust
Apply any capital or income of the trust property
Retain a beneficial interest in trust property
Act as director or officer of any corporation which is partly or wholly owned by the trust
Act as the enforcer or protector of the trust
Provide binding directions to the trustee in connection the trust property

Furthermore, the settlor is in a position to impose a general stipulation that the trustees’ powers are only exercisable with the consent of the settlor or any other individual specified in the trust’s terms. The settlor also reserves the power to change the governing law of the trust.

With these new provisions, the settlors are given great flexibility in order to adapt to changes in circumstances or objectives and are similar to Jersey and Guernsey law provisions.

Trustee investment powers

The trustees’ investment powers are in line with those of a trustee in England and Wales along with trustees from other trust jurisdictions including Malta that have followed the English Trustee Act 2000.  This is again due to the amending law. The 1992 law gave trustees freedom in terms of investment powers by simply requiring that these powers be exercised in accordance with the trust instrument and with the prudence and diligence which the individual is expected to exercise when he or she made various investments.  However, the amending law gives trustees the same investment powers as those of an absolute owner, allowing them to invest in a wider range of investments for the best interests of the beneficiaries.  Furthermore, the amending law clarifies that trustees can invest in property both movable and immovable in Cyprus and overseas, including shares in companies which are incorporated in the Republic of Cyprus.

Public Policy

Jurisdictional protection is entrenched by the amending law by providing that an international trust which contains a choice of law clause in favour of Cyprus law is fully protected from unfounded foreign judicial claims as a matter of public policy and order.

Additional amendments

Numerous other technical amendments include the introduction of powers for the trustees and others to apply to the Cyprus court for changes and directions to the list of those subject to confidentiality restrictions with regards to the affairs of trusts, the redefinition of charitable purposes in line with the definition set out in the Charities Act 2006 (England and Wales).


It is noted that the amendments give Cyprus the most updated and favourable trust regime whilst reinforcing the position of the Republic of Cyprus as an ideal trust jurisdiction within the European Union. The amending law ensures that beneficiaries and settlors enjoy the highest possible degree of protection due to the removal of any ambiguities and to the clarity of the new provisions.

The Trust – a vehicle for financial planning

There are many reasons for which the Settlor may wish to create an International Cyprus Trust but some of the principal reasons are:

  • to avoid or mitigate taxation liabilities. Trusts have traditionally been a very important tax planning device and even today a very high proportion of tax saving structures involve Trusts.
  • to preserve property in the family, by ensuring that an individual is well provided for, without giving that individual the opportunity of exhausting the family assets because of mismanagement or unsuitable marriage.
  • to benefit disabled or mentally handicapped persons by making them beneficiaries without passing control of the property to them.
  • to keep control as Trustee over the enjoyment and ultimate destination, despite giving the assets away.
  • to provide flexibility over the identity of the beneficiaries and the extent of the interest taken by them in order to take account of future developments.
  • to make gifts for charitable and religious purposes to be held by Trustees for such purposes.
  • to manage funds for the benefit of third parties e.g. pension or retirement funds.

Benefits from the use of a Cyprus International Trust

There is a number of instances where International Cyprus Trusts can be proven to be beneficial. Some of these examples are listed below, though this list is by no means exhaustive:

  • an individual who has income arising overseas which he does not wish to remit to his country of residence, can arrange for such income to be directed to the Trustees of a Cyprus Settlement to be held in Discretionary Trusts, in accordance with the Trust Deed and his Letter of Wishes
  • an individual with assets outside his country or residence, which country may in the future extend its exchange control restrictions to include remittance of overseas funds, may wish to retain the flexibility of overseas funds by transferring them to a Discretionary Trust
  • an individual who wishes to divest himself of personal assets for fiscal or other reasons can achieve that by transferring them to an International Cyprus Trust
  • persons permanently leaving one country and taking up residence in another, may obtain fiscal advantages in their new country by placing funds in an appropriate Settlement in Cyprus
  • an individual who wishes to ensure that the profits and dividends received are not remitted to the country of his residence, may set up an Offshore Settlement to invest in overseas business
  • an individual who wishes to keep the ownership of a company anonymous and confidential, can do this by setting up a Discretionary Trust which owns the shares in the company. This is a particularly useful and popular vehicle for carrying out trading and financial activities, particularly for residents of countries which do not recognise the concept of Trust
  • a Trust can be used in one country to own an underlying investment holding company in another. This type of tax planning has many advantages providing the maximum possible protection for both the Settlor and the Beneficiaries.

Overview of Types of Trusts

Cyprus offers the opportunity to set up most types of Trusts. The choice of type will obviously depend on the circumstances of the Settlor and the objectives he is trying to achieve in creating the Trust.

  • Discretionary Trust

 A Trust commonly used in Cyprus is the Discretionary Trust which gives the Trustees discretion to exercise their own judgement as to the manner and amount by which the Beneficiaries might benefit.

The Beneficiaries may be defined either by name or by reference to a class or persons (i.e. the Settlor’s children or grandchildren) or merely left to the full discretion of the Trustees. It is usual for the Settlor to indicate to the Trustees his wishes as to the disposal of the Trust property by means of a Letter of Wishes.

Where the Settlor wishes to give a more positive guidance than relying on a Letter of Wishes, it is possible to include a further party into the Trust Deed who is known as the “Protector” or “Nominator”. The Protector’s role is restrictive in the sense that he can only prevent the Trustees from exercising their discretion in certain circumstances. The Trustees will usually exercise their discretion with the prior consent of the Protector or Nominator.

  • Fixed Trust

 Another type of Trust is a Fixed Trust which does not give the Trustees any discretion when distributing the Trust assets to the Beneficiaries. An example of this type of Trust is one which requires the Trustees to distribute the income of the Trust property to a particular individual during that individual’s lifetime and thereafter distribute the capital to a named Beneficiary or Beneficiaries in specified shares.

  • Fixed and Discretionary Trust

It is possible to have a combination of a Fixed and a Discretionary Trust. The Trustees may have discretion as to the distribution of income for a period of time, but are required to distribute the capital ultimately in fixed proportions. Conversely, they may be required to distribute the income to a specified person or persons in fixed proportions but may have discretion as to how to distribute the capital amongst a class of Beneficiaries.

  • Protective Trust

A Protective Trust may be created by virtue of which a Beneficiary may be given a life interest which may become effective upon the happening of certain defined events such as the bankruptcy of the Beneficiary.

  • The simple Declaration of Trust

This form is a variation of the Discretionary Trust. The Settlor is not named in the Trust Deed and the Trustees declare that they hold the assets which were transferred to them on Trust. In this case, the Trustees accept a Letter of Wishes.

  • Trading Trust

Under a Trading Trust the Trustee is usually a limited liability company which has powers to carry on business and the Trust has trading functions and has employees to manage its business. Third parties are not aware of the existence of the Trust as all documentation used is the name of the Trustee company.

Asset Protection Vehicle

An 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.

Taxation of International Trusts

Section 12 of the International Trusts Law 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 defense. 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.

Other Advantages

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.

Trustee Services – Trust Management Services

Our Firm can provide either individual Trustees, who are usually qualified advocates, or a Corporate Trustee, through one of our subsidiary companies offering trustee services. It is also possible that a new company is set up specifically for this purpose tailored to the specific needs of the Settlor.

Trust Management Services

The Trustees will manage the Trust property and will follow the Settlor’s wishes as expressed to them in the Letter of Wishes or in subsequent correspondence. The Trustees may invest Trust money and again they will be guided by the Settlor. Full books of accounts of the affairs of the Trust will be kept and regular reporting to the client is part of the service offered

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