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


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