Cyprus Limited Shareholder and Cyprus International Trust
You can combine a Cyprus Limited with a Cyprus International Trust. For shareholders with large assets who are tax-resident abroad, this gives a flexible way to plan taxes, protect assets, and plan succession. This page explains how the structure works, what it means for tax in Cyprus and in your own country, and how moving to Cyprus or another low-tax country can give you the full benefit.
Combining a Cyprus Limited and a Cyprus International Trust
The structure and its benefits are set out below.
Cyprus Limited as settlor
The Cyprus Limited can act as settlor. This means it can put assets into a Cyprus International Trust (CIT) or a Cyprus National Trust. The trust can be set up so that the international shareholder is the beneficiary. The main features and benefits are as follows.
Asset protection
Assets put into a CIT are kept apart from the beneficiary's personal assets. This usually protects them from creditors and other claims.
Tax advantages
Cyprus has favourable tax rules for trusts. A CIT can earn income that may be tax-free, if certain conditions are met.
Flexibility and control
The settlor can set clear rules and conditions for how the assets in the trust are managed and paid out.
Succession planning
A CIT helps you plan ahead. It can make sure assets pass to the beneficiary the way the settlor wants.
The Structure in Detail
Cyprus Limited sets up a Cyprus International Trust
The Cyprus Limited moves part of its assets into a new International Trust in Cyprus. The CIT is set up the way the settlor, the Cyprus Limited, wants. It names the international shareholder of the Cyprus Limited as the main beneficiary.
CIT manages the assets
The Cyprus International Trust can manage the assets it receives. It can invest them in different ways, such as property, securities, and other investments.
Distribution of trust income
The International Trust in Cyprus can make regular payments to the beneficiary, the shareholder of the Cyprus Limited. Depending on how the trust is set up and the tax rules that apply, these payments can be tax-free or taxed at a low rate.
Tax Considerations
In Cyprus
Trust income in Cyprus has favourable tax rules. Much of that income can be tax-free where certain conditions are met.
In the shareholder's country of tax residence
Payments from the International Trust in Cyprus to the international shareholder of the Cyprus Limited can affect tax. You must declare them under the tax laws of your country of residence. Check the tax rules in your country of residence carefully, so that you meet all your tax duties there.
Later Relocation of the Shareholder's Tax Residence
A shareholder of a Cyprus Limited who is tax-resident abroad may take none of the dividends earned by the Cyprus Limited, or only part of them.
The Cyprus Limited can then move part of these saved-up dividends into a Cyprus International Trust (CIT) it has set up, and name the shareholder as beneficiary. The money first builds up in the CIT. Payments are then made at the time, or times, set out in the Trust Deed.
By the time of payment, the shareholder may move their residence to Cyprus, or to another country that does not tax trust payments to beneficiaries, or that taxes them only a little. In that case, this combination can give effective tax planning.
A step like this should be planned with care, keeping in mind the points above.
Conclusion
The combination of a Cyprus Limited and a Cyprus International Trust gives you a flexible way to manage and protect assets. It can bring real tax benefits and protection. This is especially true where the international shareholder is open to moving their residence to Cyprus, or to another country with favourable tax rules, at a later stage.
We strongly recommend detailed advice to help design the right structure and to make sure all legal and tax rules are met.
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