Category: Knowledge

Cyprus International Trusts – a snapshot of the Cyprus solution to the trust vehicle: purpose, flexibility, regulation, enforceability

Posted on | by Paschalis Paschali

An ideal tool for managing the wealth of individuals and families taking into consideration important matters such as tax optimization, asset protection and estate planning.

A Cyprus International Trust (CIT) has been traditionally used for various purposes such as:

• management of funds on behalf of others via a trustee

• organisation of collective investment and management of profit sharing and pension schemes

• tax optimization

• asset protection

• holding of property in the name of the trustee

• protection against spendthrifts and safeguarding of family capital for the next generation

• promotion of causes and charities

A CIT is a private arrangement between the relevant parties, with no requirements to disclose the trust deed or the names of the settlor or beneficiaries in any public domain and therefore retains a high level of confidentiality.

The concept of a “trust” is well-known, long-established and invariably enforced by the courts of Cyprus. Creation of a trust involves transfer of legal ownership of relevant assets to the trustee, who will hold, manage, dispose of and distribute the assets or realised proceeds to the beneficiaries, in accordance with the terms of the instrument creating the trust. The extent of the powers or discretion vested to the trustee and the extent of powers retained by the settlor or conferred upon a protector will be determined by the settlor during set-up.

A trust will qualify as a CIT if at least one of the trustees is a permanent resident of the Republic and the settlor and beneficiaries were not Cyprus tax residents in the year preceding the year of inception of the trust. There is generally great flexibility in setting up a CIT, such as the extent of discretion/power conferred on the trustee, ability to add assets, change beneficiaries, appoint a protector, change applicable law, validity in perpetuity etc. The flexibility, stability and history of the Cyprus legal framework coupled with low cost, professional experience, and regulation of the trustee’s role, whose services may only be provided by persons authorised for the purpose in accordance with the law, combine to comfort the settlor in entrusting the Cyprus trust-system.

A CIT benefits from the advantageous tax framework of Cyprus pursuant to which the trust itself will not be subject to tax as it is not afforded a separate legal personality, any income derived from sources outside the Republic will be exempt from Cypriot tax, whereas income realised by the trust will be considered as income of the beneficiaries who may be taxable in Cyprus on income derived from sources within the Republic, although tax assessment will be issued in the name of the trustee as a representative of the beneficiary.

Professional advice should be sought in all cases, to ensure a long-term solution in the preservation and growth of wealth, whilst balancing trustees’ discretion and control, having taken account of the settlor’s wishes but also the increasingly complex international regulatory framework which aims towards transparency and disclosure.

Latest amendments to the infrastructure of the Cyprus Registrar of Companies

Posted on | by techlink

Cyprus is a small European country whose economy largely relies on the services sector which is manned by highly qualified and experienced professionals and this is one of the reasons why the country has been established as a popular business hub. In the face of many challenges in recent years, the services sector in Cyprus has exhibited resilience and has strived for growth. Nowadays, in a rapidly evolving international business environment, largely reliant on technology, the lack of modern infrastructure and the often-excessive bureaucracy proves to be a significant obstacle for professionals in Cyprus.

In an effort to reduce bureaucracy and increase the efficiency within the much-criticized Registrar of Companies (“RoC”), the first steps towards modernizing the corporate legal framework have been made through the introduction in the past year of a number of amendments including the requirement for notifications and statutory forms to be filed the RoC electronically and the possibility to file documents with the RoC which are signed or certified or validated electronically, subject to the issue of regulations in this respect by the RoC. Recently, further amendments have been implemented in an effort to change the infrastructure of the RoC on a more extensive level.

The latest key amendments include the following:

  • Update of statutory forms

Over 100 existing statutory forms of the RoC have been revised to introduce simplified and user-friendly forms which will include guidance notes, aiming to reduce time-consuming correspondence with the RoC caused by unclarities. The changes include in particular (i) the merging of forms where this has been considered necessary, (ii) the removal of unnecessary information previously included in forms, such as the occupation and previous names of directors, and (iii) the introduction of new notification forms aiming to unify submissions to the RoC, such as the notification by the company directors of the decision to strike-off the company.

  • Abolition of capital duty

The capital duty payable on the authorized share capital and on any subsequent increase of share capital is abolished, an amendment which apart from being an incentive for investors, will lead to the simplification of the increase and reduction of capital of a company.

  • Electronic publications

An official gazette which shall be maintained by the RoC electronically is introduced, to allow for publications which would have been made in the official gazette of the Republic of Cyprus to be made on the RoC electronic gazette. This is a significant step towards efficiency and transparency as it will reduce time required for a publication and will give easier access to the public to information of interest in relation to companies.

  • Provisions relating to companies strike off

The provisions of the Companies Law, Cap.113, in relation to the strike off of companies from the companies register have been amended to allow creditors or members of a company to object to its striking-off, and to provide the power to the RoC to reinstate a company without a court order under certain circumstances.

  • Administrative Fines

Several provisions of the Companies Law have been amended to provide for the imposition of administrative fines in the case of late flings of statutory notifications to the RoC including notifications of allotment of shares, transfer of shares and filing of the annual return.

Even though the recent amendments include several provisions which are not directly aimed at modernizing the infrastructure of the RoC, these are considered to be a step in the right direction. Provided the amendments are properly implemented, they could be a much-needed shift to digitalization and a streamlining of the statutory requirements with the practical procedures of the RoC, in a way which is expected to reduce inconsistencies and bureaucracy and enable professionals in Cyprus to offer a higher quality of service to local and foreign investors.

What remains to be seen is whether the everyday implementation of the revised procedures will bring about the long-awaited improvements or whether they will result in further complications and backlog.