Title: TRUSTS V FOUNDATIONS THE CYPRUS INTERNATIONAL TRUST OPTION
1WEALTH ASSET VEHICLES THE CYPRUS
INTERNATIONAL TRUST AND THE INTERNATIONAL
COLLECTIVE INVESTMENT SCHEME OPTIONS
2NEED 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
3USES 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
4CONCEPT 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
5PARTIES 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 trusts 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
6IMPORTANT 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 manage the property BUT only
beneficiaries are entitled to the benefit and
profit of the trust they own this property
beneficially. - Trust does not posses separate legal
personalityit 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
7CYRPUS 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)
8PRIVATE 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
9EFFICIENT TAX STRUCTURE WITH CIT
Protector Physical person or company
?
CIT
- Cyprus International Trust
10BENEFITS 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
11International Collective Investment Schemes
(ICIS)The New Trend
12Introduction 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)
2
3
13Common 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
14Characteristics 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
15Characteristics 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
16INVESTORS
Family Foundation
Trust
Directly Physical Person
Legal Entity
Off-shore SPV 1
Off-shore SPV 1
Off-shore SPV N
Fund Custodian
Advisory Committee
Fund Administration
AAA Investment Fund
Fund Board of Directors
Auditors
SPV 1 Cyprus Holding company
SPV N Cyprus Holding company
SPV 2 Cyprus Holding company
Investment 1
Investment 2
Investment N
17BENEFITS 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
11
2
18- 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 info_at_globalserve.com.cy
- CONTACT PERSONS
- DINOS ANTONIOU, C.E.O
- PHANI SCHIZA ANTONIOU, MANAGING
- DIRECTOR
19 20Disclaimer
- Whilst every effort was made to ensure that the
information contained in this booklet is correct
and error-free, no responsibility or liability
can be accepted by Globalserve Consultants Ltd
for any loss or damage incurred as a result of
relying on information contained in this booklet.
Globalserve Consultants Ltd, its management and
staff, any individual or legal entity that has
contributed in any way to the preparation,
composition or promulgation of this booklet
hereby disclaim any overall liability arising
from any inappropriate, improper or fraudulent
use. This document is not intended to be used as
a general guide to investing, or as a source of
any specific investment recommendations, and
makes no implied or express recommendations.
This document does not constitute an offer or
solicitation to any person in any jurisdiction in
which such an offer or solicitation is not
authorized or to any person to whom it would be
unlawful to make such as offer or solicitation.
It is the responsibility of any person or persons
in possession of this material to inform
themselves of and to observe all applicable laws
and regulations of any relevant jurisdiction,
including MiFID compliance. Prospective
investors should inform themselves and take
appropriate advice as to any applicable legal
requirements and any applicable taxation and
exchange control regulations in the countries of
their citizenship, residence or domicile which
might be relevant to the subscription, purchase,
holding, exchange, redemption or disposal of any
investments. No part of this material may be i)
copied, photocopied or duplicated in any form, by
any means, or ii) redistributed without the prior
written consent of Globalserve Consultants Ltd .
14