In July 1992, Cyprus enacted the International Trusts Law 69(I)/92 (the "Law"). The Law regulates the establishment and administration of offshore trusts and is designed to complete the spectrum of services the island offers as an offshore center. It should be noted that since Cyprus is a common law jurisdiction the concept of trusts has always been part of its law. Thus, the object of the Law has been to modernize and update the existing legal framework. 

The most important provisions of the Law are: 

(a) Definitions: Section 2 of the Law defines the conditions necessary for a trust to be considered international and thus come under the ambit of the Law. In that regard it is necessary that the settlor and beneficiaries are not permanent residents of Cyprus, at least one of the trustees is a permanent resident of Cyprus and the trust property does not include any immovable property situated in Cyprus. The distinguishing element of this definition, which is also the unique feature of the Law compared to other offshore jurisdictions, is that according to the proviso in section 2, a trust shall not fail to qualify as an international trust by reason only that either the settlor or the trustee or any one or more of the beneficiaries is a Cyprus offshore company. This facility, as explained hereunder, can offer unique opportunities to a wide range of investors. 

(b) Asset Protection: Sections 3(2) and 3(3) provide that no trust shall be void unless and to the extent that it is proven in Court by a creditor that at the time of the transfer to the trust this was done with intent to defraud, the burden of proof lying with the creditor. No action may be brought against the trustee after two years from the date of the transfer. 

(c) Perpetuities and Accumulation: Section 5 provides that the perpetuity period for non charitable trusts is one hundred years, while, according to section 6, income may accumulate for any period within the period of the trust. 

(d) Applicable Law: Section 9 allows for the change of the law of the trust to and from the law of the Republic of Cyprus, if such change is authorized by the terms of the trust itself. This possibility, coupled with the possibility of having more than one trustees one of whom is not a resident of Cyprus, deals effectively with possible reservations about the political situation in Cyprus. 

(e) Confidentiality: Questions of confidentiality are dealt with by section 11 which prohibits any of the trustees or any other person including government officials and officers of the Central Bank of Cyprus from disclosing any information about the trust. Sections 11(2) and 11(3) provide that a Court may by order allow disclosure of information where such disclosure is of paramount importance to the outcome of the particular civil or criminal proceedings. 

(f) Taxation: Section 12(1) provides that the income and gains of a trust derived or deemed to derive outside Cyprus shall be exempt of all Cyprus taxes and that there shall be no estate duty in respect of assets belonging to the trust. All income and profits derived from trust property outside the Republic are exempt of all taxation while the trust property is not subject to estate duty or other inheritance tax. It should be noted that the wording of the section is such that the trust is liable to taxation in Cyprus (though its foreign income is taxed at zero rate) thus preserving the possibility of arguing that it is a resident for the purpose of the various tax treaties. 

(g) Stamp Duty: The instrument creating an international trust is subject to flat stamp duty of Cyprus Pounds 250 which corresponds to approximately U.S.$ 500.