Transcript TRUSTS V FOUNDATIONS THE CYPRUS INTERNATIONAL TRUST …

WEALTH ASSET VEHICLES:
THE CYPRUS INTERNATIONAL TRUST AND
THE INTERNATIONAL COLLECTIVE INVESTMENT SCHEME OPTIONS
G
CON S U L T A N T S L T D
NEED FOR ASSET PROTECTION VEHICLES
 SUCCESSFUL BUSINESS PEOPLE AND WEALTHY FAMILIES MAY POSSESS
VALUABLE ASSETS WORLDWIDE
 NEED FOR EFFICIENT STRUCTURE TO HOLD, PROTECT AND MANAGE
THEM TO RESPOND TO THE DIFFERENT SYSTEMS AND RULES OF THE
VARIOUS JURISDICTIONS UNDER COMMON AND CIVIL LAW
 NEED FOR ASSET PROTECTION VEHICLES:
– TRUSTS ARE THE VEHICLES IN COMMON LAW JURISDICTIONS
– FOUNDATIONS ARE FOUND IN CIVIL LAW JURISDICTIONS
 WE PRESENT THE CYPRUS INTERNATIONAL TRUSTS AS AN OPTIMUM
OPTION
USES OF TRUSTS
 SUCCESSION PLANNING: Smooth and effective transfer of assets from
one generation to the other as per the wishes of the owner and not in
line with the forced heirship rules
 ASSET PROTECTION AGAINST THIRD PARTY: Assets transferred to a trust
are protected from attacks from creditors, ex business partners and
divorce disputes
 TAX PLANNING: An efficient planning involving trust can help to avoid
inheritance tax and optimize income or capital gains tax liability
 CONFIDENTIALITY: The trust deed is not a public document and does not
have to be disclosed to third parties
 CONSOLIDATION AND CONTROL: Helps to avoid dissipation of wealth by
spendthrift heirs and ensures the continuation of successful enterprises
irrespective of the abilities and the differences of the heirs under
professional management
CONCEPT OF TRUST
• An equitable obligation
• binding a person or a company, called ‘the trustees’
• to deal with property over which he has control, called the ‘trust
fund’,
• vested to him by the previous owner and creator of the trust, ‘the
settlor’
• for the benefit of other persons, called ‘the beneficiaries’
• In accordance with the instructions and wishes of the settlor on
certain terms and with certain powers, usually set out in the ‘Trust
Deed’
 In simple terms under a trust a settlor divests himself/herself of
the legal title to property in favour of trustees, who derive no
benefit from the trust itself, but they hold such property for the
benefit of other persons
PARTIES TO THE TRUST
 SETTLOR: Creates the trust and transfers his/her property to the trust and decides
the terms of the trust and the rights to be granted to the beneficiaries and the
powers to the trustees
 TRUSTEES: They can be physical persons or legal entities ( the latter are known
as Private Trust companies PTC) and manage the fund in line with the terms of
the trust deed and the wishes of the settlor as they may be outlined in writing in
the Letter of Wishes for the benefit of the beneficiaries
 BENEFICIARIES: are those for whose benefit the trust was created and for whose
benefit the trustees manage the trust property
 THE PROTECTOR: This is the person that acts as a watchdog over the trust’s affairs
and will have the right to appoint and dismiss the trustees, have their consent
sought before trust capital is distributed or before the number of trustees is
increased. The settlor may be a protector but as a rule a trustee may not. The
protector has the right to veto general decisions taken by the trustees such as the
decision to transfer the assets to the beneficiaries. A protector is not necessary
but it may be appointed for the peace of mind of the settlor
IMPORTANT ASPECTS OF TRUST
 Divided ownership :The assets comprising the trust fund are legally held and
registered as owned by the trustee and the trustee is under a duty to control and
1) are entitled to the benefit and profit
manage the property BUT only beneficiaries
of the trust ; they own this property beneficially.
 Trust does not posses separate legal personality:it operates by the trustees
acting in their name
 In many jurisdictions the same person may simultaneously be a settlor,
trustee and the beneficiary of the trust ( though it is not advisable for tax or
asset protection purposes)
 Law of EquityTrust: Obligations and the beneficiaries rights are protected by
court on the basis of the law of equity.If the trustees are unclear about the best
way to manage the trust, or intend to alter the trust conditions as this is to the
best interests of the beneficiaries, they can seek instructions and sanction of
their actions from the court
 Discretionary trusts give the trustees discretion on such matters as which
beneficiary receives income and /or capital and when. The trustees require
instructions on the use of discretion ( Letter of Wishes) In Fixed Trusts
,beneficiaries have a fixed right to income and or capital
CYRPUS INTERNATIONAL TRUSTS
 Cyprus Trust Law is based on International Trust Law 69/1992 based on the
English system, The Trustees Law Cap 193 and the equity and Case Law in
England
 CIT is a trust whereby :
– The settlor is not a permanent resident of Cyprus (to be abolished under the
new trustees law)
– The trust property does not include immovable property in Cyprus ( to be
abolished)
– At least one of the trustees is resident in Cyprus
– The nature of CIT can be discretionary I,e the trustee is allowed to exercise a
large element of discretion with regard to distribution of income and assets
and to choose from a large ‘pool’ of potential beneficiaries which could very
from year to year
– Beneficiaries are not permanent resident of Cyprus ( to be abolished)
 Duration: Max 100 years (to be abolished under the new trustees law)
 A CIT may be irrevocable ( i.e the settlor cannot claim the return of the trust
property from the trustees) unless otherwise stated in the trust deed ( clause of
revocation)
PRIVATE TRUST COMPANIES
 A Private Trust Company (PTC ) is a company which has its main
function acting as trustee of a particular trust or a number of
related trusts, for example with the same settlor or related
settlors
 Benefits:
– Desire for a family control/ influence ( they can be directors
of the PTC) Of course even without the PTC there are ways to
meet the objective of influence by the family
– Flexibility in appointing experienced and skilled persons
– Quick decision making
EFFICIENT TAX STRUCTURE WITH CIT
Distribution of Income to Beneficiaries
Protector
Physical
person or
company

Trustees Physical persons or Company – Private Trust Company
CIT
Cyprus International Trust
Cyprus Holding Company
Operating
Companies
Operating
Companies
Operating
Companies
BENEFITS OF CYRPUS INTERNATIONAL TRUSTS
 Income gains and profits are exempted from income tax, capital gains tax and
any other tax in Cyprus
 No withholding tax on dividends, royalties received by Cyprus Company
 No estate duty or inheritance tax in Cyprus
 Confidentiality is safeguarded as registration is optional
 Trusts may hold shares of Cyprus companies with Cypriot nominees for
confidentiality
 The same person can be the settlor, trustee (through offshore company in
which he is the sole director and beneficial owner) and also beneficiary
 No exchange control regulations
 No reporting requirements
International Collective
Investment Schemes (ICIS)
The New Trend
Introduction on Cyprus Funds( ICIs)
In May 1999, Cyprus introduced legislation enabling the establishment and regulation of
International Collective Investment Schemes (‘ICIS’).
The Central Bank of Cyprus is the regulatory and supervisory authority for ICIS which
issues the licences for establishment of International Collective Investment Schemes, which
are the Cyprus Funds.
The sole objective of an ICIS is the collective investment of funds of unitholders.
Licensing Requirements: The Bank must be provided with such information so as to be
satisfied as to the competence of the directors, promoters, managers or trustees
Taking into account the investment policy and the particular investment objectives, an ICIS
may be designated as fixed or variable capital and can be :
An ICIS marketed to the general public
An ICIS marketed solely to experienced investors; or
A private international collective investment scheme (only 100 or less investors)
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Common uses of a Cyprus fund
Property investments, namely in countries having double tax treaties
with Cyprus (i.e. India, Russia, Poland and others)
Accumulation of funds of high net worth individuals in a private fund
Investments in securities bonds and other financial instruments
Collective fund of several sub-fund portfolios
Fund of a number of other funds or sub-funds
Characteristics & Structure of Private ICIS in the form
of International Variable Capital Company
( the most commonly used type)
Maximum number of members upto 100 investors
Share capital of the company may vary according to the investors
participating/exiting the fund Thus when investors buy, the company issues more
units and when investors exit, the company reduces the number of units.
Board of Directors: the principal shareholder (s) may appoint themselves or their
representatives to become members of the Board.
A Cyprus Holding Company needs to be formed for the formation of the fund,
followed by the application to the Central Bank of Cyprus. The approval of the license
is a 3 month procedure
Cannot be offered/ marketed to the general public and the right to transfer is
restricted
Characteristics & Structure of Private ICIS in the form of
International Variable Capital Company
( the most commonly used type)
Custodian needs to be appointed with whom assets are placed.
Cyprus Banks are very trust worthy & also banks in other countries are also
accepted as custodians
Administrator needs to be appointed in Cyprus whose task is to calculate the net
assets value and other financial matters. The accountants of Globalserve can play
this role
External auditor needs to be appointed. Dinos Antoniou & Co ltd can be auditor
to ICIs
A Fund Manager needs to be appointed ( but it can also be a member of the
board who is experienced in fund management)
Investors do not have to be experienced and there is no minimum subscription
It Is not required to apply investment restrictions
INVESTORS
Family Foundation
Fund Custodian
Trust
Off-shore
SPV 1
Directly Physical Person
Off-shore
SPV 1
Legal Entity
Off-shore
SPV N
Advisory Committee
AAA Investment Fund
Fund Administration
Fund Board of
Directors
Auditors
SPV 1
Cyprus
Holding
company
SPV 2
Cyprus
Holding
company
SPV N
Cyprus
Holding
company
Investment 1
Investment 2
Investment “N”
BENEFITS OF ICIS
Cyprus ICIS enjoy significant tax incentives:
 An ICIS is treated identically as any other Cypriot entity, hence enjoys 10%
flat corporation tax on annual net profits earned worldwide.
 Exemption from tax on profits from sale of shares and other instruments.
 Exemption from tax on foreign dividends received.
 No withholding tax on income repatriation (dividends paid to unitholders).
 No capital gains tax on disposal of shares/units by the holders.
 A wide network of Double Tax Treaties in place with more than 45 countries
worldwide.
Funds also offer:
 diversification of risk
Confidentiality with respect to the identity of the investors
Professional expertise in managing investments
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CONTACT US
GLOBALSERVE CONSULTANTS LTD
9 VASSILI MICHAELIDES
3026, LIMASSOL-CYPRUS
P.O BOX 57048, 3311, LIMASSOL, CYPRUS
TEL. 00357 25 817181, 00357 25 824545
FAX. 00357 25 824055
WEB SITE: www.globalserve.com.cy
EMAIL: [email protected]
CONTACT PERSONS:
DINOS ANTONIOU, C.E.O
PHANI SCHIZA ANTONIOU, MANAGING
DIRECTOR
THANK YOU СПАСИБО
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