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Asset Protection in Cyprus

Creating an offshore trust to protect assets in Cyprus

What is an offshore trust?

An offshore trust is a place in another country where assets can be held; a trust is created in accordance with the laws of a foreign jurisdiction. The trust is managed by the trustee on behalf of the founder of trust management (who transfers his assets to the trust), acting for the benefit of the designated beneficiaries.

The legal structure of the trust includes the obligatory presence of the “Founder of trust management”, which transfers or allocates assets. The “Trustee” must be an adult person in his right mind, responsible for managing the assets in the interests of the person or group of persons referred to as the “Beneficiaries”. The Guarantor monitors the activities of the trust, ensuring that it complies with the provisions of the Trust Declaration and that the trust is managed in a satisfactory manner.

Why create an offshore trust in Cyprus?

One of the most attractive aspects of trust in Cyprus is its 100% anonymity and preservation of the highest degree of confidentiality, which is highly valued in business. these countries provide full protection of assets and equity; in addition, the trust is not subject to any taxes. In general, income gains and profits are excluded from income taxes, capital gains taxes, special charges, and any other taxes in force in Cyprus – all of which constitute the main argument for creating trusts in Cyprus.

International Trusts in Cyprus operate in accordance with the International Trusts Act adopted in 1992.

Purpose of a Trust in Cyprus (International Trust in Cyprus)

In order for a trust to be considered as an International Trust in Cyprus, the following mandatory conditions must be met. First, the founder of trust management should not be a permanent resident of Cyprus. At least one of the trustees must be a permanent resident of Cyprus. Beneficiaries should not be permanent residents of Cyprus. Finally, a trust property must not include any immovable property in Cyprus.

Trusts are mainly used by rich people who have the opportunity to plan their financial affairs and provide for their descendants and future generations. In this regard, an attractive feature of the trust is that potential heirs cannot sue the trust and that the assets of the trust cannot be seized. Many people want to protect their assets and become founders of trust. As a founder, you have the right to transfer any assets to the trust and legally declare that you do not own them.

Advantages of an offshore trust in Cyprus

As stated above, income, income growth, and profits are excluded from income tax, capital gains tax, special charges or any other taxes in force in Cyprus. Besides:

– there is no inheritance tax in Cyprus

– there are no currency regulation rules

– there are no reporting requirements for international trusts in Cyprus

– The trust capital received in Cyprus by a foreign resident or transferred to Cyprus by non-resident trusts is not subject to taxes on the trustee.

Creation of an offshore fund in Cyprus

Funds are considered to be an alternative to trust. Funds are widely recognized as the preferred tool for protecting the assets of the elite and wealthy people, as they provide the most varied benefits of treating expensive assets.

What is a foundation in Cyprus?

Funds in Cyprus are created if jurisdiction cannot recognize a specific trust (i.e., if this jurisdiction does not fall under common law jurisdictions), but the funds are indeed very similar to trusts in their legal structure, since the funds also there are “founder”, “guarantor”, “beneficiary” and “council members”.

A foundation acquires the quality of a legal entity immediately after its establishment, so the foundation becomes the owner of its property. Accordingly, the fund does not belong to anyone and is usually created in the interests of the company’s offshore clients. Funds can own many corporations and assets, can issue instructions for execution, as is done in trusts. There is no requirement for a trustee, participants or shareholders in the fund.

Funds can be used for different purposes, however, the main objectives are commercial, charitable or private interests. Funds are an excellent asset protection tool, and this is appreciated by businessmen of all levels. Moreover, funds can be created for a specific period.

Existing types of funds in Cyprus

Funds are created in two main areas of activity:

1) Foundations of any communities or associations, and

2) Corporate Funds.

The structure of the funds can be of 4 types:

– Public fund – created by families, groups of individuals, etc.

– Private foundation – created by individuals.

– State Fund

– Mixed Fund – created by any of the persons listed above.

Purpose of offshore funds in Cyprus

– Protection of personal status and corporate property

– The Fund is recognized by jurisdictions, both under civil law and in the framework of common law

– Inheritance Planning

– Tax planning for asset inheritance

– Avoidance of the right to an obligatory share in the hereditary mass

– Management by the corporation is carried out and controlled

– separation of voting and economic benefits

– Profit participation schemes for employees

– Pension Funds

– Art Collecting

– Charity groups of people

– Funds can be successfully used by organizations to create schemes for employee participation in profits, pension schemes, stock operations and insurance.

What assets can be in an offshore fund in Cyprus?

You can keep several types of assets in an offshore fund, since:

– Shares and securities of private and public corporations

– investment plans portfolios

– Property in the form of real estate and intellectual property

– Bank deposits

– Life insurance policies.

The main advantages of creating an offshore fund in Cyprus

– Effective tax planning

– Structured management system for distributing and managing your own state

– Inheritance tax reduction

– Payment of reasonable compensation for your services to the fund

– Non-taxable contributions to the fund

– The Fund may own many corporations and assets without limiting the nature of the assets.

– The Foundation can formulate strict instructions for execution, as is done with declarations of trusts.

The question most often asked of listeners, readers and customers are: how do I protect my assets?

This question is completely understandable and more important than ever in uncertain times like these. Since 2008, global debt has tripled from $ 100 to $ 300 trillion. For this reason, the world’s central banks are currently taking our entire financial system to absurdity. 

They flood “the markets” with money for free. The misconception behind it: debts could be paid with more and more debts. The result: if you do not go shopping on dispo, then you get money almost without interest borrowed. States and corporations pay for their bonds on paper interest rates. In the bond market, however, they are currently de facto often having to pay money if they want to lend their money.

The countries of Southern Europe have – and are – able to make a sensational debt despite record unemployment, record debt, and comparatively weak economic performance. In the meantime, some states of Northern Europe and a number of debt-making companies are now making money. As a small saver you get from your bank at best, mini rates below the inflation rate. Those who park large sums of money in a bank account will, on the other hand, be asked to pay in many cases today.

The true crisis is yet to come

This historically unique central bank experiment of a gigantic money flood for free will have disastrous consequences for savers, investors, and citizens. For the past ten years, the global economy and world financial system have not really come out of the crisis. 

Worse, the next big crisis will come. In comparison with it, the “financial crisis” of 2008 will be like a light summer storm. And we will all have to pay for the consequences of the gigantic mismanagement. The question is not whether you lose as an investor. The question is only when – and how much.

The most popular investments

Most citizens have their pensions and assets on just two legs spread. One pillar is traditionally regarded as a model of solidity: the self-used property, whether as a cottage in the countryside or as an apartment in the city. “My home is my castle,” says the English.

The ravages of time may gnaw on the property as on all human work, but if you keep them in good shape, then their value is considered secure. The belief in land ownership is almost as strong in most people as the belief that the sun will rise again tomorrow.

Unfortunately, many overlook two huge risks. On the one hand, the risk that property is often financed by loans – so our debt money system may also gnaw at the foundation of your stone refuge. On the other hand, many Americans and Spaniards had to learn painfully in the past crisis years, the property can also mutate from real value to monetary value. In other words, it has become a speculative object whose book value can be as shaky as that of other investments.

The other mainstay of the classical asset allocation is based on paper instead of concrete: life insurance policies, private pension insurance, Riester or Rürup pensions, maybe even a home saving and a few “federal treasure”.

We humans stand and walk only on two legs. But there is not a single reasonable reason to use this recipe for your asset allocation. Here is the magic word “Diversification”. 

The more legs your financial reserves are, the better.