Trusts, as such, are not taxable in Cyprus but the beneficiaries are taxable through the trustees.

 Local Trust

Provided that there is no local profit then there is no taxation on the income, capital or distribution of Cyprus International trusts.

It should be noted that dividends and/or other income received from an underlying Cyprus international business company will not be regarded as Cyprus-source income for Income Tax purposes.

 International Trusts

Cyprus International Trusts enjoy important tax advantages, providing significant tax planning possibilities. The following advantages are indicative of the possible options for tax minimization:

• All income, whether trading or otherwise, of an International Trust (i.e. a Trust whose property is located and income is derived from outside Cyprus) is not taxable in Cyprus.
• Dividends, interest or other income received by a Trust from a Cyprus international business company are neither taxable nor subject to withholding tax.
• Gains on the disposal of the assets of an international Trust are not subject to capital gains tax in Cyprus.
•  An alien who creates an International Trust in Cyprus and retires in Cyprus is still exempt from tax if all the property settled and the income earned is abroad, even if he is a beneficiary.
• The assets of an international trust are not subject to estate duty in Cyprus.
• Trusts are usually used by wealthy individuals for the purpose of protecting their inheritance or capital gains taxes in their home country. They can also be used by expatriates settling into a trust before repatriating, assets acquired while working abroad, to protect such assets from the tax net of their home country.

Double Tax Treaties

It is possible for trusts to come under the score of double taxation treaties. This will depend on whether the other signatory state recognizes trust structures and principles of

equity and whether the trust itself meets the eligibility criteria set out in the given treaty.

Advantages of a Cyprus Trust

Trusts created in Cyprus can prove advantageous for a number of reasons. The following are examples:

Divesting of Personal Assets

An individual who wishes to divest himself of personal assets for fiscal or other reasons can achieve this by transferring them to an International Trust created in Cyprus.