The Certainty of Objects: this certainty refers to the fact that the trustee should know who the beneficiaries are and they should be identifiable. The beneficiaries cannot be a large or vaguely identified group that the settlor would not be in a position to identify who the beneficiaries are.
The legal regime regulating the framework of trusts in Cyprus is derived largely from the English legal system and reproduces a large amount of its features. The legal regime itself consists of the Trustees Law, Cap. 193 and on The International Trusts Law, No. 69(I)/92, (“The International Trusts Law”), as amended with the International Trusts (Amending) Law of 2012. Cyprus has ratified the “Hague Convention” on trusts which aims to provide clarity over issues with respect to conflict of laws and recognition in the international sphere of operations. Common Law and the Principles of Equity are likewise typically utilized in modifying and enhancing trusts, however enhancements pursuant to such must be threaded carefully so as to ensure they do not come in conflict with the Cyprus legal regime on trusts. In this article the primary focus will be diverged on providing an overview of the Cyprus International Trust.
Cyprus International Trust as an Instrument
For the purposes of attracting investment in the Republic and to further enhance the national prestige of the Republic as an attractive and lucrative business environment, the Republic developed the “Cyprus International Trust”. It is an instrument or doctrine which aims to attract foreign investments and to further boost the revenue generating capabilities of the local businesses. The Cyprus International Trust in comparison with the normal trusts retains modified provisions which drastically improve the asset protection functionality of the trust and allows the Settlor with an unprecedented number of powers manifested as control and authority of the trust. Such reserve powers are further extended to exert controlling functionality or guidance over the trustee’s exercise and performance of respective obligations. The International Trust is irrevocable unless a specific power of revocation is reserved in it and cannot be set aside by the settlor’s creditors unless and to the extent that the creditors can show that the trust was made with the intent to defraud them. The burden of proof of such intent lies with the creditors and an action against the trustees to avoid the trust, on grounds of fraud, must be brought within two years from the date when the relevant transfer or disposition of assets is made to the trust. In addition to the formalities presented hereinabove, in order for a trust to qualify as a Cyprus International Trust the further criteria must be established, namely for the Settlor and the Beneficiaries to not be resident in Cyprus for at least a period of twelve calendar months prior to the date on which the Cyprus International Trust is created. Furthermore, at the very least one of the individuals appointed in the capacity of a Trustee is required to have their permanent residency in the Republic.
Benefits and Advantages.
The Cyprus International Trust offers a considerable number of benefits and advantages over the general trusts. These advantages are likewise multi-faceted in the context of not being focused primarily on a single aspect, whether it is administrative or economic. A few of the more advantageous benefits retained by picking a Cyprus International Trust over a general one, are as follows:
Development and Protection.
The Cyprus International Trust offers an enhanced level of protection with respect to the corporeal and incorporeal assets of the trust from claims and predatory practices as such assets are separated entirely from the funds and wealth inventory of the Settlor. A creditor may launch proceedings against the Trustee with the intent to set it aside, provided that the creditor satisfies the burden of proof in evidencing that the trust was created for fraudulent purposes, however such possibility is available only for the first two years commencing from the date of the creation of the trust. The Cyprus International Trust can likewise be used as an alternative to creating an inheritance will, and in this context no foreign law relating to inheritance can invalidate the trust or in any way impact its existence. Likewise, the Cyprus International Trust can not be impacted by a foreign jurisdiction which does not recognize the legal doctrine of Trusts likewise any connected person with the Cyprus International Trust can not be deprived of any right or obligation by virtue of foreign law. The Cyprus International Trust can exist in continuity until its completely exhausted of assets. Consequently, the Trustee can be afforded with extended investment powers in order to enhance and multiply the wealth contained therein. If the beneficiary of the Cyprus International Trust is not a resident of Cyprus, the income and profits derived from the Cyprus International Trust from outside of Cyprus are not subjected to any taxation.
Management and Regulation.
The Settlor of a Cyprus International Trust is capable of exercising a higher degree of management of the property contained in the trust. This is typically effected by issuing of wishes, typically in the form of a letter issued in perpetuity. Furthermore, the Cyprus International Trust is regulated primarily in accordance with the terms of the trust document and is not limited by the Law. Likewise, a Cyprus International Trust can be expanded to include additional assets in the future as the Settlor wishes. The contents of the Cyprus International Trust is likewise kept confidential particularly with respect to the documents and financial statements and any subsequent disclosures can only be achieved by virtue of a court order issued by a competent court of the Republic.
Conclusively, the Cyprus International Trust represents a superior legal instrument compared to its regular counterparts. The various benefits related to taxation, security, management and development of a Cyprus International Trusts has been one of the more attractive instruments for foreign investors when deciding upon the methodology of their wealth management. The Republic has proven to undertake a comprehensive and encompassing approach to this subject matter. The Republic likewise offers legislation covering the provision of professional services with respect to Cyprus International Trusts.
In order to gain a better understanding of the Cyprus International Trust do not hesitate to contact our law firm for comprehensive consultations and analysis into the subject matter at hand.
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