Trusts have been very important tax planning devices.
International trusts are governed by the International Trust Law of Cyprus, 1992. International trusts are not taxed in Cyprus and enjoy important tax advantages. The Law defines an International trust as a trust where both the Settlor and the Beneficiaries (unless a charitable institution) are non-residents of Cyprus and the trust property does not include immovable property situated in Cyprus. The Law prescribes that at least one of the trustees is a permanent resident of Cyprus.
The most common types of trust are the discretionary trust where the trustees have the power to decide any distribution of income or capital to the beneficiaries and the fixed trust where the trustees must distribute the income and the capital to the beneficiaries in specified proportions.
Some of the tax and other advantages are the following:-
- All income whether trading or otherwise of an international trust is not taxable in Cyprus;
- An individual can invest overseas using an international trust so that dividends will not be remitted in his country;
- An individual can protect his property from future lawsuits, future bankruptcy and other claims by creditors.