Setting up a trust can be a tax efficient way of administering your property, your business affairs and providing for your loved ones after your death. There are many different types of trust so it is important to take expert advice on what type of trust will suit you.

At Polycarpos Philippou & Associates L.L.C. we can advise you on the type of Trust most suitable for you.


1.What is a Trust
A Trust is the institution whereby a person or a company holds property for the benefit of another. Trusts themselves do not have a legal personality; instead the trust is a legal relationship created by a settlor, in lifetime or on death, when assets are placed under the control of a trustee, for the benefit of a beneficiary or for a specified purpose.

The trustee is the person holding and managing the assets but cannot in any way benefit for them.

2.When are Trusts used
Trusts are used for privacy, asset protection and tax optimisation.

For example Trusts in private transactions may be used:

  • Enabling property to be held for persons who cannot (or should not) hold it directly themselves (for example, minor children).
  • Allowing someone to make provision for others privately (because while they are in trust, the assets are held in the name of the trustees, not the beneficiaries).
  • Preserving property for future generations.
  • Protecting property against claims brought against any of the beneficiaries.
  • Inheritance purposes (transferring the assets on trust so they do not form part of the estate of the settlor.)
  • In finance transactions (e.g. loans for a specific purpose, securitizations)
  • Employee benefit trusts and pension trusts
  • Unit Trusts (a trustee holds a portfolio of assets and sells units (i.e. share) to investors)
  • Holding investments and shares of companies.

In commercial transactions trusts are typically used:

  • In finance transactions (e.g. loans for a specific purpose, securitizations)
  • Employee benefit trusts and pension trusts
  • Unit Trusts (a trustee holds a portfolio of assets and sells units (i.e. share) to investors)
  • Holding investments and shares of companies.

3.Types of trust

      a.The Cyprus International Trust (Statutory Trust)
      b.The Common Law Express Trust.
      c.Implied Trusts (Resulting, constructive or common intention trusts)

Only the first two categories are used in commercial situations, tax and estate planning. The third category arises by implication of the law whenever for example an employee takes secret bribes in breach of his duties to his employer (constructive trust), or when two persons buy a property and register it on only one of them (resulting trust).

The difference between a common law express trust and a Cyprus International Trust is that the Cyprus International Trust has default rules in statute that are to some extent different than the common law express trust, which is the same as in England.

The CIT is mainly used for International Estate and Tax Planning but can also be used for commercial purposes.

4.The Cyprus International Trust

The Cyprus International Trust is a Trust regulated by statute, the Cyprus International Trust Laws 1992 as amended. A major amendment in 2012 strengthened the asset protection features of the CIT and provided greater flexibility.   

There is no registration of the Beneficiaries or Settlor of the Trust, unless the Trust holds land in Cyprus, in which case the Beneficiaries may be registered with the Land Registry.

Trustees, protectors and their representatives are under a strict obligation of confidentiality and may not disclose information about the Trust such as the name of the Beneficiaries or the Settlor, unless required by Law or directed by a Court Order. (Based on anti-money laundering regulations Banks may request the list of beneficiaries of Trusts for whom money are held in Cyprus.)
           ii.Asset Protection:

All trusts by their nature perform asset partitioning and protection functions since they no longer are in the possession of the settlor neither the beneficiaries.

The CIT however also provides for a limitation period of two years to challenge the trust and only on the basis of defrauding creditors.  This requires the proof of intention to defraud creditors a very high standard of proof. The burden of proof lies with the person claiming the fraud.

Succession and heirship laws do not apply once the property is given on trust.

The Cyprus Courts have exclusive jurisdiction and any disputes are determined in accordance to Cyprus Law. Thus no other Court may decide issues relating to the CIT.


Cyprus Taxes on a residency basis. If the Beneficiary is in Cyprus, the worldwide income and profits of the Trust are subject to Cyprus Tax.  If a Beneficiary is non-resident in Cyprus only income and profits earned from sources within Cyprus are taxed.

The Settlor may not be taxed after the establishment of a CIT (provided the Settlor does not direct the Trustees) since the Trust is irrevocable. There may be a tax event upon the transfer of property to the Trust and this must be studied prior to any given set-up of Trust. The Beneficiaries under a discretionary trust may not be taxed until they receive a benefit.

Please contact us for structures tailored to you that may reduce or eliminate tax liability and legally optimize tax.


The Settlor may maintain the ability to amend the Trust.  The Trust is regulated by its Trust Deed, as agreed by the Settlor, without any hard requirements provided by Law for annual or general meetings, accounts, annual reports etc. It is easy to add or remove beneficiaries or buy beneficial interests under the Trust.

Further trustees may have very wide (or more limited) powers to manage the Trust.  The income of the CIT may be accumulated and a CIT may be used for charitable purpose.

The governing law of the Trust may change, and companies from any jurisdictions may act as Trustees.

          v.Trustee Protection:

Trustees are under duties of loyalty (called fiduciary) not to benefit in any way from their role as trustees. In fact Trustees are not entitled to get paid unless it is agreed with the Settlor and provided for in the Trust Deed. If trustees benefit personally from the Trust the trustees will face criminal and civil consequences. Companies from any jurisdiction may act as Trustees but at least one Trustee must be resident in Cyprus.

Trusts may also have Protectors. A protector has the power to supervise the Trust and may have the power to change Trustees or give consent in certain transactions. A natural person or a company from any jurisdiction may act as a Protector.

The Court has an inherent role in supervising Trusts and may do so upon application   of any beneficiary or the Protector.

The Settlor can reserve powers in relation to the Trust, for example to act as Protector. The Settlor can retain the right to amend the Trust. For tax purposes we normally advise against the Settlor retaining any sort of control beyond any letter of wishes as to how the Trust.

Beneficiaries of the Trust may terminate the Trust. The Trust deed may provide that they may not do so unless a certain age.

      vi.Qualifying as a CIT

All that is needed for a Trust to qualify as a CIT is the Settlor and the beneficiaries must not be resident in Cyprus for one year preceding the Trust creation and at least one of the Trustees must be resident in Cyprus.

For more information please contact us.



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Corner of Neof. Nikolaides Ave & Theo Kolokotronis Street,
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