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A comprehensive definition of “trusts” under Cyprus law does not exist. However, the court, through case law, has deemed that a trust arrangement is a structure whereby the holder of a property (the “trustee”) has an obligation to manage that property for the benefit of another (the “beneficiary”).
The trust is created by transferring the legal ownership of the trust property from the previous owner (the “settlor”) to the trustee, though the beneficial ownership over that asset belongs to the beneficiary. The terms upon which the trustee should manage the property are usually written and expressed in a trust deed.
The validity of the trust will depend on the existence of the following three certainties:

  • Certainty of intention – express intention of the settlor to create the trust;
  • Certainty of subject matter – readily identifiable assets that will form the trust property;
  • Certainty of objects – beneficiaries must be ascertained or ascertainable.

Cyprus trust law is mainly regulated by the Trustee Law, Chapter 193 and the International Trusts Law of 1992, and is essentially based on the English system.
Under the Cyprus International Trusts Law, an international trust is described as a trust created by a non-resident settlor for the benefit of non-resident beneficiaries.
The law goes further in providing that:

  • The settlor of the international trust, being any person who is of full age and of sound mind, must not be a resident of Cyprus in the year preceding the year of the creation of the international trust;
  • No beneficiary, other than a charity, should be a resident of Cyprus in the year preceding the year of the creation of the international trust; and
  • There must be at least one trustee resident in Cyprus at all times.


A Cyprus trust has no limit on its duration and may be valid and enforceable without containing a fixed maturity date.

Cyprus law to apply
Any issue relating to a Cyprus international trust shall be determined in accordance with the applicable law of Cyprus and no reference to the laws of any other jurisdiction will be made. Therefore, the validity, interpretation or effect of any trust or transfer of property to a trust will be examined on the basis of the laws of Cyprus only and will not be affected by any inheritance or succession laws in force in any country.


The administration of the trust property by the Trustees should be made prudently and in strict compliance with the terms of the trust.

Any action taken by the Trustees contrary to or in excess of the terms of the trust deed will be deemed as a “breach of trust” and such Trustees will be personally liable for the full extent of any loss incurred as a result of such breach.

The Cyprus International Trusts Law provides the trustees with extensive investment powers, ensuring the Trustee’s capability of performing his tasks. Pursuant to these powers, the Trustee may hold, maintain or invest in any movable and immovable property in Cyprus and abroad.

Reserved powers to the settlor

The settlor under a Cyprus trust is provided with a right to reserve certain powers, whether retained or given to him in his capacity as a protector or inspector for the application of the trust or otherwise.
The powers that may be reserved by the settlor are outlined in section 4A of the relevant law, some of which are set out below:

  • the amendment or revocation of any terms of the trust;
  • the allocation, distribution, payment or other disposition of income or capital from the trust property or the issuance of binding directors to the trustee for that purpose;
  • the appointment or termination of any trustee, inspector, protector or beneficiary;
  • changing the applicable law governing the trust or place (forum) of management of the trust;
  • the restriction of the exercise of any power of the trustee, for example requesting that these be exercised only subject to the approval of the settlor or any other person expressly mentioned in the trust deed.

The retention of any of the above powers by a settlor of an international trust shall not, in accordance with Cyprus law, in any way affect the validity of the trust or delay the execution of the trust and should not give rise to an intention of the settlor to defraud its creditors.

Certain information on Cyprus International Trusts, such as its name, date of establishment and trustees, need to be recorded with the relevant authorities in Cyprus within 15 days from the trust’s establishment, though this registration does not include the requirement for disclosure of the trusts’ beneficiaries.
While the costs for registration are approximately EUR 80, a fixed stamp duty of EUR 430 is payable on the creation of an international trust.

Taxation on Cyprus trusts will be considered on the basis of the beneficiaries’ residence.
Where the beneficiary is resident in Cyprus, the income and gains of an international trust from sources within and outside Cyprus are subject to any taxation which is imposed in Cyprus.
On the other hand, where the beneficiary is not resident in Cyprus, only the income and gains of an international trust from sources within Cyprus will be subject to taxation in Cyprus.
It is possible for trusts to come under the score of double taxation treaties. This will depend on whether the other signatory state recognizes trust structures and principles of equity and whether the trust itself meets the eligibility criteria set out in the given treaty.

In addition to the favorable tax regime applicable on Cyprus trusts, as described above, we set out below a brief summary of a few of the many other advantages of a Cyprus trust.
Asset protection
A Cyprus trust cannot be set aside by the settlor’s creditors unless and to the extent that the creditors can prove that the trust was created specifically for the purpose of defrauding such creditors. An action by any creditor of the settlor challenging the validity of the trust, on grounds of fraud, must be brought within two years from the date of the transfer of the trust property to such trust.
Pre-Migration arrangement

A Cyprus trust may prove to be an efficient pre-migration vehicle, as high net-worth individuals moving to a high tax country may opt to place some of their funds in an Cyprus International Trust, before such move.
Protection and flexibility of overseas investments
It may be used as a tax planning device for investments overseas. By investing in overseas business through a Cyprus International Trust, both settlor and beneficiaries will be offered with the maximum possible protection and will be able to avoid remittance of their profits from such investments to the country of their residence, which will also enable them to retain the flexibility of their overseas funds.
Estate planning

An individual, through the use of a Cyprus trust, can determine its succession and inheritance plan without being affected by any inheritance laws of any country.

A trust under Cyprus law may be removed from the Cypriot jurisdiction and vice versa. In an ever-changing business world, the availability of the choice between applicable laws is proved to be a significant benefit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought on your specific circumstances.
For further information,For any further information, please contact us.

Halil İbrahim Koca

Immigration Adviser

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