Cyprus trust law reform finally arrives
12 March 2012
Reform of Cyprus's international trust law is
happening at last, with the approval by the island's House of
Representatives of long-awaited amendments to the 1992 Act.
The new provisions clarify the rules on
settlor residence, requiring only that the settlor must not be a
Cyprus tax resident in the year preceding the year of creation of
the trust. It also removes the prohibition on resident
beneficiaries and on ownership of immovable property in Cyprus.
A further amendment excludes the laws of any
other jurisdiction. Any dispute relating to Cypriot international
trusts will be determined by the laws of Cyprus without reference
to any other laws.
Settlors will also be able to create
reserved-powers and settlor-interested trusts. This new provision
is similar to those in Jersey and Guernsey trust law, giving
settlors flexibility to adapt to changes in circumstances or
objectives.
The amendments also extend the investing
powers of trustees, allowing them to invest as freely as if they
were beneficial owners.
Moreover, the new law includes a provision
authorising trustees to invest in property both in Cyprus and
overseas, including shares in Cyprus-incorporated companies. The
1992 Act's prohibition on investments within Cyprus is thus
abolished, which should boost the island's property market.
Other provisions in the new bill abolish the
ban on perpetuties; redefine charitable purposes to match the
public benefit test now used in England; and set out rules for
determining choice of jurisdiction.
"The amendments address a number of perceived
deficiencies in the trust regime in Cyprus", commented David Stokes
of Cypriot law firm Andreas Neocleous, which helped lead the law
reform initiative. "The reform of the International Trusts Law will
give Cyprus the most modern and favourable trust regime in Europe
and restore it to the premier league of trust jurisdictions."
Further information about these reforms will be presented
at the
STEP Cyprus Conference in May
Source
Neocleous & Co LLP
STEP Cyprus Conference