Company Formation Cyprus: Taxation of Income

Any person (natural or legal) resident of Cyprus is taxable with its whole world income. Non tax-resident persons are liable for taxation with their income derived in Cyprus.

A legal person (company, corporate body) is deemed to be resident of Cyprus if the management and the control of the company are located in Cyprus. Although there is no definition of "resident" in the sense provided by relevant laws, it is assumed that a company is a resident of Cyprus if the majority of the directors resides in Cyprus or if Board Meetings are regularly held in Cyprus.

A natural person is considered to be resident of Cyprus if he/she is staying in Cyprus at least 183 days a year.

The Cypriot Income Tax Law prescribes a uniform taxation of corporations of 10% of the taxable income.

The taxable income includes:

- profits deriving from business

-profits from interest

- profits from licensing fees,

-profits from rental income of real estate,

- capital gains from securities

Ship management companies may choose to be either taxed by a corporate tax of a 4,24% tax on their profits or a taxation based on tonnage.

There is no limit to loss carry-forwards.

Within a firm group, gains of one company can be set off against the losses of another company. Group profit will be taxed in this case. 

Company Formation Cyprus: Foreigners and their companies generally remain unaffected by the defence tax

According to the Law on Special Contribution to Defence Tax (Defence Tax Law), a natural person resident of Cyprus, has to pay a 15% Defense Tax on its paid dividends. If the recipient of the dividends is a legal entity, that entity is exempt from the tax defense, unless the legal entity itself pays no dividends for at least two years.

Residents of Cyprus (natural or legal persons) pay 10% defense tax on income deriveed from interest. It is therefore appropriate to distribute profits or, if they are not to be distributed, to invest them in securities.

Interest income on bank accounts in Cyprus of non-resident persons (foreigners as a natural or legal person) is not subject to Defence Tax.

Should your company distribute dividends to its shareholders, these dividends may thus remain on a Cyprus bank account in the name of the shareholder; defence Tax will not be applied.

Company Formation Cyprus: Income from dividends is categorically not taxable in Cyprus

Income of a company taxable in Cyprus, which consists of dividends paid from another taxable company in Cyprus, is not subject to the Law on Special Duty to Defence tax.

Income of a taxable company in Cyprus, which consists of dividends paid from another non-taxable company in Cyprus is not subject to the Law on Special Contribution to Defence Tax, if the taxable company holds at least 1% shares of the company paying the dividends.

Income of a taxable company in Cyprus, which consists of dividends paid from a company out of Cyprus is not subject to the Law on Special Contribution to Defence Tax and is also not taxable according to the Income Tax Law.

The above exemptions do not apply if;

-        more than 50% of the income of the company paying the dividends comes from income occurred from financial investments and

-        the profits of the company paying the dividends are taxed with half or less than half of the Cypriot Corporate Tax, i.e. 5% or less.

Both above conditions must be met in order to occur non-applicability.

Interest income from bank deposits

50% of interest income from bank deposits is exempted from income tax. This concerns taxable residents of Cyprus (natural or legal).

However, according to the Law on Special Contribution to Defence Tax, interest income from bank deposits is taxed by 10%. Thus, the total tax duty for interest income from bank deposits is 15%.

Interest income from deposits on current accounts and business accounts is exempted from the above provisions (see below).

It is advisable therefore, to invest dividends either in securities, for example, or to distribute them.

Interest Income from Ordinary Course of Business of a Company

Interest income related to business activities is part of a company’s profit and therefore subject to 10% income tax of the company (corporate tax).

Special contributions in accordance with the Law on the Special Contribution of Defense Tax do not apply.

As per definition in the official circulars of the Cyprus Tax Authority, the following activities are deemed to be business activities of companies:

-        account activities (current and business accounts)

-         for finance companies: interest income from loans, financing and leasing business

-        interest from debtors of the company

-        interest income of insurance companies

-        interest income of intra-group finance companies 

Company Formation Cyprus: Non-taxable companies (whose management and operations are located outside of Cyprus) are exempt from any income tax and special contributions.

Royalties received by taxable persons (natural or legal persons) resident of Cyprus are fully booked as profits; correspondingly, royalties paid are fully booked as expenses of the company.

Royalties for the use of rights within Cyprus are subject to a withholding tax of 10%.

Royalties for the use of rights outside of Cyprus are not subject to withholding tax.

Non-taxable companies (whose management and operations are located outside of Cyprus) are not subject to withholding tax mentioned above.

Income deriving from the holding or purchase and sale of securities is not subject to any income tax.

The income derived from holding or the disposal of securities is not subject to any capital gains tax. Exception: If the securities are shares of a company which owns real estates in Cyprus, income from holding or from the disposal of such securities will be taxed with flat capital gains tax of 20%.

Securities in this sense are:

-        Shares

-        Bonds

-        Governmental Bonds

-         Founder’s shares and other legal shares of companies incorporated within and outside of Cyprus

-        as well as options on the aforementioned.

Comprehensive revisions since the beginning of 2009:

The Tax Authority of Cyprus (“Commission for Income and Tax”) has announced an expanded redefinition of the scope of securities in an official circular!

As a result, income from holding of and the trade with the following securities is basically not subject to any income tax:

- Ordinary shares

- Founder’s shares

-  Preference shares

-  Options on aforementioned shares

-  Debentures (obligations)

-  Bonds

-  Short Positions on titles

- Future and Forward Contracts on titles

- Exchange contracts (swaps) on titles

-  Certificates of Deposit (i.e. Global Depositary Receipts on titles (GDRs) and American Depository Receipts (ADR))

-  Claim rights on obligations and bonds (but not claim rights on interest thereof)

This latest revision is undoubtedly a significant step towards a first-class global financial center.

Loss Carried Forward

Losses from business activities may be set off against future profits for an unlimited period of time.

Offset of Losses for Groups of Companies

Losses of company that belongs to a group of companies can be set off against profits of companies which belong to the same group of companies. The condition to be complied with is that the companies are incorporated in Cyprus and belong to the same group of companies. Both companies must belong to the group of companies throughout the entire tax year.

Group of companies in this sense means that either at least 75% of one of the two companies belong to the other company, or that at least 75% of both the companies belong to a third company.

‘Belonging’ means that a company holds directly or indirectly at least 75% of the voting shares of the other company, and the holding company is entitled to at least 75% of the dividends, as well as to at least 75% of the values of the held company in the event of its liquidation.

Examples:

The EU provides for the application of the Merger Directive to companies. Since partnerships of natural and/or legal persons constitute a corporation under Cypriot law, the Merger Directive applies to them consequently.

The Cypriot legislation has expanded the applicability of tax-neutral reorganizations of groups of companies to company mergers from outside the EU.

The EU merger guidelines are not only applied to cross-border reorganizations, as provided by the EU Directive, but also to the reorganization of groups of companies within Cyprus.

Furthermore, Merger Directive is not only applied to capital gains tax, as provided by the EU Directive, but also to stamp duty and purchase tax (VAT).

Scope of Applicability

The rules of the EU Merger Directive are applied to mergers, divisions, transfers of assets and exchanges of shares.

Characteristics:

-         The transfer of assets and liabilities, including provisions and reserves, does not cause any tax liability for the transferring company.

-         Accumulated losses of a corporation may be transferred to the new company.

-         If a transfer receiving company is shareholder of the transferring company, no tax liability arises to the receiving company on revenues from this transfer, even if the receiving company will loose its holdings of the transferring company during the reorganization.

-         The exchange of shares is not subject to taxation. The value of newly subscribed shares is the same value as the value of the exchanged shares before the reorganization.

Cyprus’ Unilateral Warranty:

Should there be no DTT in place between Cyprus and another country, or should the Cypriot company not qualified for the provisions of the EU Parent-Subsidiary Directive, then Cyprus unilaterally guarantees a tax credit for the tax paid in the other state. The tax credit cannot exceed the amount of taxes paid in the other state.

Company Formation Cyprus: List of DTTs of Cyprus

Company Formation Cyprus: Application of all relevant EU directives

The EU aims to establish, within its borders, a uniform economic region to its greatest possible extend. Within this process, national states increasingly loose importance.

Basically, this phenomenon is the continuation of an ongoing process since the mediaeval times. While today's Germany, for eample, was a conglomerate of regional principalities during the Middle Ages, each one applying their own fiscal and tax policies, it is now, since the founding of the Federal Republic, a unitary state, apart from the territory (federal) distinctions.

Germany is a founding member of the EU and continuously undergoes transformations. More and more laws and regulations are changed to comply with EU law.

Just as the principalities of Germany waived their sovereign rights piece by piece and submitted to a common idea, the German idea, during the late Middle Ages, nowadays more and more German rights are replaced by European law, convinced of the advantageousness of a unitary European legal area.

For sure this is not a homogeneous process; there are always voices militating against giving up existing rights and privileges, but always there are other voices that are convinced of the idea and superiority of a unitary Europe and that vehemently support the process. It cannot be stopped anymore, anyway.

Just as you used to be (and still are) free to settle down in Berlin or Stuttgart with your German company, for instance, due to EU Directives you are now free to do so in Germany, France or Cyprus.

Within the EU, “freedom of choice" regarding to the legal form of the company is guaranteed. Every EU citizen is free to establish a company in the member state where corporate law rules grant the largest freedoms. Then you are free to operate in any EU Member State, even in your own country, through branches or representative offices. It is explicitly not required to exercise any economic activity at the "Headquarter" of the company. The law to be applied is that of its residence state, so e.g. France, Cyprus, etc…

Restriction: The not yet fully EU-compliant tax laws in Germany, suggest a permanent establishment (place of business) in the state of the registered office, in order to benefit from EU tax privileges also in Germany.

Following a few court decisions that Cyprus enjoys a sound and conclusive legal system based on the Anglo-Saxon law system. Jurisprudence is independent from legislature and performs well. The protection of property is a firmly established legally protected interest.

In Cyprus, the following maxim applies to corporate and tax:

"It is the mission of the State to protect the property of those who put their trust in Cyprus."

Discretion is essential in Cyprus!

In the context of Article 26 of the OECD Model Agreement about the Avoidance of Double Taxation, Cyprus has also submitted to the obligations of sharing information and of transparency.

However, Cyprus meets those obligations only under certain conditions.

On the one hand, the obligation of disclosure only applies, in principle, to information concerning non-tax-residents. However, since a company established in Cyprus, is resident and taxable in Cyprus, the obligation to provide information applies only in the event of a crime which is being prosecuted.

The same applies to bank secrecy. Data of corporate clients established in Cyprus are only exposed in case of a court order.

But also the duty to supply information regarding data from non-tax-residents is subject to various conditions.

On top of the above conditions, a written approval of the Attorney General is required for each case in order to be obliged to provide information. Without such an approval, nobody is obliged to provide information on natural or legal persons who are not residents of Cyprus. Information on natural and legal persons, who are residents of Cyprus are not provided anyway.

While the deductibility of expenses is heavily restricted with all kinds of regulations and laws in Germany and other countries, and may even be prohibited, nearly all reasonable expenses, which are really associated with the management, are fully deductible in Cyprus.

In addition, there are a number of generous tax allowances.

We would gladly provide specific information on request.

Cyprus enjoys an excellent infrastructure. Communication standards are among the highest in the world. Fast Internet and VoIP communications are used widely and are of low cost.

The financial services sector of Cyprus is characterized by efficiency and professionalism. It is common that employees and managers receive their higher education in England, other EU countries or the United States. The long experience of Cyprus as an international financial and trade centre has led to a high degree of experience and expertise.

The financial services sector and foreign companies in Cyprus employ about 60,000 foreigners.

Nearly all banks operate separate "International Business Units" which are specialised in serving foreign clients.

Axiomatically, all individuals and companies from Europe, including Germany, are entitled to maintain their business from a registered business address in a more tax-favourable EU-country, thus benefiting from lower tax burdens on revenues. As a prerequisite for those advantages, the beneficial owners must be able to proof the presence of certain criteria, with the so-called criteria of “permanent establishment” being the most important one. Regarding the criteria of permanent establishment, please read the related section below.

Germany tops all EU countries, when it comes to imaginativeness related to tax levy. Doing so, Germany does not shy away not to apply EU law knowingly and intentionally, though it is applicable in Germany as well. Instead, the Federal Ministry of Finances retreats in a quiet corner and waits until it’s forced by appropriate court, to give in at least in the court decision concerned points.An important court decision of this kind for the application of the EU Parent-Subsidiary Directive was for example the ruling of the European Court of Justice regarding the Cadbury-Schweppes case (C-196/04, published on 12.09.2006). In that decision, the ECJ confirmed the EU-Freedom of establishment and recognized an CFC legislation, ruling the exisiting practice to tax dividends received from subsidiaries in another EU country as illegal. In its very detailed judgment the ECJ also noted that "the mere exploitation of existing tax gaps in tax levels within the EU, shall not be treated as such an abuse". More about the Cadbury-Schweppes decision in the appropriate section below.

The Federal Ministry of Finance has therefore modified in 2007 the Article 8, paragraph 2 of the Foreign Tax act (AStG). The Article 8 par. 2 AStG now excludes the “addition tax” (“Hinzurechnungssteuer” in German) for domestically controlled companies with a registered office or management in an EU Member State from where the company exercises a real economic activity, provided the taxpayer can prove it.In order to eliminate any lack of clarity arising from other articles, the Federal Ministry of Finance also sent an instruction to its subordinate authorities, dated 08.01.2007, which confirms the impact of the Cadbury-Schweppes-decision and instructs lower tax authorities not to apply any “addition tax”, if the relevant conditions are met (> Criteria of “permanent establishments”).

Both the EU parent-subsidiary directive and the Foreign Tax Act, most double taxation treaties as well as relevant court rulings and by-laws require the existence of permanent establishments in the other EU State, in order to benefit from the lower taxes of the other EU State.

The recognition of a permanent establishment of the foreign company is subject to the existence of specific characteristics, which are designed by the German legislature, of course, as far as possible in its own favour.

However, if the following individual characteristics have been implemented, the characteristics of permanent establishemnts will be recognized as given, and the parties concerned will enjoy the tax incentives of the other country (source country) even in Germany.

A permanent establishment in the terms of the provisions of the Federal Ministry of Finance (Germany as well as other countries) is assumed if the following conditions are met:

1.            The Company keeps an office in Cyprus with its own phone number, registered on its name, at which someone can be reached (answering machine is not enough). The head office should also be detectable by the accounts of the company’s running costs. We can provide this service.

3.            Depending on the volume of business, the company must employ a secretary (part-time possible), for general business and office tasks of the company. We would be able to provide adequate personnel. If necessary, contribution payment receipts from the Social Insurance have to be provided.

4.            The company should send important offers etc. per email or letter from Cyprus, and should sign important agreements fully or partly in Cyprus and send such agreements to the other party from Cyprus. 

What are your alternatives, and what consequences would they cause?

Please read under "Examples" on the left about the applications offered through an EU company and about the structure most suitable for you.

1.           A not taxable Limited in Cyprus

Company Formation Cyprus: The taxable limited in Cyprus

From the perspective of the German tax authorities, a Cyprus Company has to provide an establishment, in order to enjoy the Cypriot tax privileges. One of the premises features is a recognizable management in Cyprus. The result is thus a taxable limited in Cyprus. This limited pays 10% corporate tax on its profits. EU Directives and tax treaties are fully applicable. Dividends of that company paid to foreign countries are not taxable in Cyprus.

If the recipient of the dividends in Germany is a legal person (company), the dividends can be collected without being taxable because of the EU parent-subsidiary directive tax. Taxation takes place in the form of Income tax upon distribution of dividends by the German company. Because of the EU Freedom of establishment and the correspondingly modified § 8, Paragraph 2 a AstG, a taxation of foreign sourced income does not apply here. The taxpayer has to pay taxes on the dividends paid to him by the German Company of the Cyprus company with a flat tax of 25%.

If the recipient of the Cypriot dividends is a natural person, the dividends received from Cyprus are directly taxable with 25% flat final withholding tax.

All in all are the following advantages arising:

- Corporate Tax only 10% instead of 25% in Germany

- No business tax

- Better depreciation ways of operating costs

- 25% final withholding tax versus 43 or 48% income tax in Germany

- Special bonuses to executive directors of the Cypriot company don’t have to be taxed in Germany

- The double taxation agreement between Cyprus and Germany is fully applicable

- Of course you can operate a branch or representation in Germany.

- Fiduciary occurring shareholders and directors are also possible.

 Company Formation Cyprus: The taxable Limited in Cyprus with BVI Partner

Someone who wishes to transact on behalf of its own EU company, without appearing as a shareholder, but doesn’t wish to appoint fiduciary acting shareholders, can appoint a company as an associate founded on the British Virgin Islands.

Advantages:

- Anonymous registration of the BVI company is possible (bearer shares)

- Nominal Directors are possible, if desired

- No accounting requirement for the BVI company

- No taxes at all for the BVI company

- The BVI company is recognized as a partner in Cyprus

- The opening of an account at a Cypriot bank on behalf of the BVI company is possible (thus easily accessible account in the EU)

- Further no withholding tax on dividends paid by the Cypriot company to a BVI company

- You would control the Cypriot company and officially make transactions on its behalf

- Corporate income of the Cypriot company, only 10% instead of 25% in Germany

- No business tax.

2. The taxable Limited in Cyprus, with tax consolidation in Germany as a partner

An excellent opportunity to earn gained profits in Germany almost tax-free (under progressivity proviso), is a Cypriot company, which is dominated by a tax consolidation in Germany.

An affiliation consists of a subsidiary company and a controlling company. Between the subsidiary company and the controlling company must exist a profit transfer-and-control agreement. A subsidiary company, which usually is a GmbH & Co. KG, holds 100% or less of the shares of a Cypriot Limited Company. Because of the EU parent-subsidiary directive, the dividends of the Cypriot company are being received tax-free by the subsidiary company.

The subsidiary company must be a non-incorporated firm, as a non-incorporated firm usually occurs after the Civil Code. The non-incorporated firm under Civil Code is not taxed as a company.

The taxation of the profits paid to the members of the non-incorporated firm happens under progressivity proviso.

Besides the advantages of a limited company in Cyprus mentioned in the preceding sections, there is the advantage of an affiliation, which provides that incoming dividends from the Cypriot company are taxed in Germany only under progressivity proviso.

Thus, dividends are not included in taxable income of the beneficial owner's holding, but only increase its tax rate.

Company Formation Cyprus: The Cypriot Holding

Cyprus has excellent arrangements for holding companies and stands today as a holding domicile in an advantageous competitive position to Ireland and the Netherlands

This company structure, including a Holding, considers the ownership position of a foreign (eg German) subsidiary by a holding company based in Cyprus, which in turn is owned by the parent company.

Many multinational corporations already enjoy the benefits of Cypriot holding companies.

The Cypriot Holding provides many options, which can not be considered in detail here. Some important features are listed below:

- In Cyprus there is a real privilege for Holdings: Holding companies are not taxed.

- If a Cypriot holding company holds at least 15% on an another European company, for example a German limited liability company, then the arising dividend due on such participation is given by the limited liability company to the holding company tax-free. The collection of dividends remains also at the level of the Cypriot holding company tax-free, if it holds at least 1% of the shares in the subsidiary.

- The payment of dividends by the holding company abroad is tax exempt in Cyprus. Cyprus does not levy a withholding tax, regardless of the existence of a double taxation agreement and independent of the EU parent-subsidiary directive.

- The collection of dividends paid by the Cypriot holding company is also at the level of the parent company in another EU country tax exempt. From the German point of view are dividends received by corporations (Holding) always active gainings.

- Incoming dividends at the Cypriot holding company may be collected there and then reinvested.

- If the holding company solds shares to the subsidiary, the income generated therefrom is exempt from corporation tax.

- Profits of the holding company that is not attributable to the dividends received will be subject to a 10% tax.

- A holding company serves also the Risk diversification. Holding companies are often being placed over "operational" companies in Cyprus, to reduce liability. If you operate, for example, different business sectors or projects, it stands to reason to found a company for each business or each project its own, in order if applicable not to compromise the other Businesses and projects. The various companies are then concentrated under the cloak of the Holding.

Cyprus offers a very favorable environment for Fund companies (ICIS, the International Collective Investment Schemes "). The Cypriot law for International fund management companies (International Collective Investment Schemes Law, 47 (I) / 1999) differentiates from the structure, four different legal forms of investment companies:

- International closed-end funds (International Fixed Capital Companies)

- Open International Fund (International Variable Capital Companies)

- International Fund Foundations (International Unit Trust Schemes)

- International investment partnerships with limited liability (International Investment Limited Partnerships)

In addition funds are different in their objectives:

Public investment funds

- Investment companies for "sophisticated investors"

- Private investment companies

We encourage you to contact us if necessary to advise you on your own needs. 

International Closed-End Funds

Only non-resident natural and legal persons can be an investor in International Closed-end funds.The fund assets must accordingly come from abroad. The capital must be at least U.S. $ 100,000 and can not be changed after the formation. Fund units can be marketed to the public or to "experienced investors". Closed-end funds founded as a private investment company (Limitation of shareholders to a maximum of 100 persons) are exempt from the above provision. Closed fund companies can, like all other forms of investment companies listed below, be established for a limited time.

International Open Funds

Both, resident and non-resident individuals and legal entities can be shareholders of International Open Funds, the capital of open-ended funds is variable.

International Fund Foundations

International Fund foundations combine the fund- and the foundation-law and are fund companies, accordingly established as a foundation. (Trust)

International investment partnerships with limited liability

International Investment partnerships with limited liability are non-incorporated firms with limited liability, similar to the German KG and the English LLP, working with appropriate permits under the Law of International fund companies as a fund company.

Public fund companies

Public fund companies are fund companies, which promote and sell the fund shares in public. Public trust companies are subject to all provisions of the Act for International fund companies.

Fund companies for "experienced investors"

The following natural and legal entities are considered as "experienced investors":

- people who provide themselves financial services to the public, and

- people with knowledge of all relevant facts of the Investment market, which often make investments of significant extent and from which can be expected that they know and accept the risks of investment.

Fund companies for experienced investors can be exempted from certain requirements of the law regarding international fund companies upon application.

Unit certificates of investment companies for experienced investors have to amount to at least $ 50,000 or an equivalent amount of another currency.

Fund companies for experienced investors may not issue bearer shares and must not merchandise their shares to the public under any circumstances.

Private investment companies

Similar to the aforementioned fund companies for experienced investors, are private investment companies subject to certain limitations:

- A maximum of 100 investors,

- No solicitation in public ("experienced investors" may be solicited directly),

- Limited right to distribute shares

- No bearer shares

Private investment companies are established as open-end funds.

Permits

Under the previous legislation all kinds of fund companies had to be approved by the Central Bank. It is currently (April 2009), however, a change in legislation expected, in such a way that the central bank will approve in future only fund companies, which are limited to a maximum of 100 investors.

Fund companies, which plan to have more than 100 investors, will need to be authorized by the Cyprus Securities and Exchange Commission (CySEC).

Fund administrators

The assets of a fund company may not be managed by the management of the fund company, but by an external administrator. Administrators may be banks and other companies that may be required to prove their competence.

Permanent establishment requirement

For international fund companies there is no permanent establishment requirement in Cyprus. If an international fund company does not have fully equipped headquarters in Cyprus, a local representative must be appointed to act as an authorized representative to the supervisory authorities.

Taxation

International fund companies are operating in the following fiscal framework:

- International fund companies are subject to an income tax of 10%, regardless of whether they are tax-residents or not,

- the recruited income from the possession and the sale of securities is exempt from corporation tax,

- income from dividends is tax exempt in most cases,

- payments of dividends, taxes and royalties to non-tax residents, natural and legal persons, are not subject to withholding tax

- Investment income from immovable property outside Cyprus is exempt from taxes in most cases.

In summary, and generated in a practical sense, international investment companies pay only corporate tax on in its own name earned interest income.

Most double tax treaties of Cyprus provide a taxation on stock and bond profits exclusively in Cyprus. In Cyprus are gains of this nature exempt from any taxation.

Please contact us for more details, if you are interested in a circulation of funds in Cyprus.

Cypriot trusts (Foundation Trust) offer unique opportunities to investors of various interests and positively stand out from trust of many other legal systems.

Today's Trusts are based on the Trust Act 1992, which has modernized the since British colonial times existing trust law. Cyprus International Trusts are exempt from taxes and can be used for a variety of investments.

A Cyprus International Trust consists of the following parties:

- The settlor,

- The trustee,

- The protector and

- the beneficiary.

Cypriot companies, which are exempted from taxes may be used as trustees of the trust. Cypriot companies, which are exempted from taxes offer the significant advantage, that they are not subject to the corporate tax of 10 percent, which would otherwise be paid on the profits from services.

A Cyprus International Trust must have the following characteristics in order to benefit from the exemption:

Important: Both the settlors and the executors or the beneficiaries may occur as non-taxable Cypriot companies. The Trust will continue to apply as an International Trust. This is compared to the conditions in other states a significant difference, which offers to the founder many creative options.

International Trusts are designed for a period of 100 years and are usually irrevocable. A revocability can be included in the foundation charter, but such trusts are considered by the tax authorities in Cyprus as suspect. Another possibility for an early termination of the trust relationship would be, if creditors apply the termination of the trust and if they can prove that the Trust was founded with the sole purpose of deception. The burden of proof lies with the creditors. Such an entry must be made within two years after the Foundation of the considered eligible assets.

The Cypriot legislation provides the possibility to transform an International Trust later in a National Trust, and vice versa.

Discretion is an essential feature of the Trust. Unless ordered by a court, settlors, trustees, protectors and beneficiaries may not reveal any information. Offenses are under heavy penalty.

A special feature of the Cypriot trusts is that a so-called protector can be appointed. The protector does not appear in the foundation charter.

The role of the protector is to control the trust administrator. The protector has no right to intervene in the administrative operations of the administrator. But he has the right to dismiss the administrator.

According to Cypriot trust law the founder and protector may be the same person or company.

The legislation provides in clear form for the complete tax exemption of the trust, if its profits and gains derive from sources outside Cyprus, or may be deemed to arise from sources outside Cyprus. The exemption also applies to any form of inheritance tax.

Cyprus International Trusts are expressly exempted from any kind of a registration.