Cyprus International Trusts: Requirements, Protection and the Proposed 2026 Reform

For families with assets and beneficiaries in several jurisdictions, the trust remains the most flexible succession and asset-protection tool available, and Cyprus has one of the more developed statutory frameworks for it in the European Union. The Cyprus international trust, created under the International Trusts Law of 1992 (Law 69(I)/1992), is a common feature of structures we see for relocating and internationally mobile clients. It is also about to change: a bill now before the House of Representatives would rename it, remove its central residency test and tighten several technical provisions. Anyone setting up a trust now, or advising on an existing one, needs to understand both the current rules and the direction of travel.

What a Cyprus international trust is

The 1992 Law does not create a self-contained trust code. It builds on the Trustees Law, Cap. 193, of 1955, which closely follows the English Trustees Act 1925, and adds provisions designed to make Cyprus attractive as the governing law for trusts held by non-residents. The trust itself is a familiar express trust: a settlor transfers assets to a trustee, who holds and manages them for the benefit of named beneficiaries under the terms of a trust deed. A protector is commonly appointed as an additional check on the trustee, and the settlor will usually leave a letter of wishes to guide discretionary decisions.

The conditions that must be met

Article 2 of the Law sets the qualifying conditions, and they are strict. The settlor, whether an individual or a company, must not have been a Cyprus resident in the calendar year preceding the year in which the trust is created. The beneficiaries must satisfy the same test, with an exception for charitable institutions. At least one trustee must be resident in Cyprus throughout the life of the trust. A trust that fails these conditions at the outset does not qualify as an international trust under the Law, so the residency position of every settlor and beneficiary needs to be verified before the deed is signed, not assumed.

The 2012 amendments relaxed the regime in several respects that older commentary still gets wrong. Settlors and beneficiaries may become Cyprus tax resident after the trust is created, provided they were not resident in the preceding year. The 100-year duration limit was removed. And, contrary to what a number of firm websites still say, an international trust may now hold immovable property in Cyprus.

Retained control without losing validity

Section 4A of the Law, added in 2012, expanded what a settlor can keep without undermining the trust. A settlor may reserve powers to revoke or modify the trust terms, to direct distributions of income or capital, and to appoint or remove trustees and beneficiaries, and may issue binding instructions to trustees on the exercise of their powers. This is significant for clients who want to settle assets without surrendering practical control. It also carries a caution: the more control retained, the more carefully the trust must be assessed against the tax and succession rules of the settlor's home jurisdiction, which may treat a heavily controlled trust as still belonging to the settlor.

Asset protection: what the firewall does and does not do

The Law's principal asset-protection feature is a firewall provision in Article 3. A transfer into a Cyprus international trust cannot be set aside unless a creditor proves to a Cyprus court that the transfer was made with intent to defraud, and any such claim must be brought within two years of the transfer. The burden of proof rests on the creditor. The Law also protects the trust against claims founded on foreign succession rules, including forced heirship, and against foreign judgments to the extent they conflict with the trust's validity under Cyprus law.

That protection is real, but it is not a way of escaping existing liabilities. A transfer made to defeat a creditor who is already known, or made while the settlor is insolvent, is exactly what the fraud exception exists to catch, and the two-year period runs from the transfer, not from the creditor learning of it. Trusts are strongest when they are established for planning reasons well ahead of any dispute. This connects directly to the enforcement position described in our article on enforcing foreign judgments in Cyprus: recognition of a foreign judgment against a settlor does not automatically give the creditor access to properly settled trust assets.

Tax treatment

The trust is transparent for Cyprus tax purposes. Where the beneficiaries are not Cyprus residents, income and gains of the trust arising outside Cyprus are not taxed in Cyprus, and Cyprus-source income remains subject to ordinary Cyprus tax. Cyprus has no inheritance tax, and since 1 January 2026 stamp duty no longer applies to trust deeds, following the abolition of stamp duty in the 2026 reform. Where a beneficiary later relocates to Cyprus, the trust's position and the beneficiary's own position, including any non-domiciled status of the kind discussed in our article on the 2026 non-dom reform, need to be considered together rather than in isolation.

Regulation, registration and confidentiality

Acting as trustee by way of business is a regulated activity in Cyprus under the Law regulating companies providing administrative services, Law 196(I)/2012, supervised by the Cyprus Securities and Exchange Commission, the Cyprus Bar Association or the Institute of Certified Public Accountants, depending on the provider. Trustees are bound by a statutory duty of confidentiality and may not disclose information about the trust except under a court order or legislation.

Confidentiality is not the same as invisibility. Following the EU's fifth Anti-Money Laundering Directive, the trustee of an express trust must register it with the Trusts Register kept by CySEC and keep the information up to date. The register does not hold the trust deed and is not open to the public; access is limited to competent authorities and to persons who can demonstrate a legitimate interest. Clients should assume that regulators and banks will know who the settlor, trustee and beneficiaries are.

The 2026 reform proposal

A bill prepared with the Trusts Committee of the Cyprus Bar Association was submitted to the House of Representatives in 2026 and awaits article-by-article committee discussion. As proposed, it would replace the term "international trust" with "Cyprus express trust" and remove the residency requirements for settlors and beneficiaries, so that Cypriot residents and non-residents would sit under one unified framework rather than the Trustees Law for residents and the 1992 Law for everyone else. The proposal also clarifies that the Cyprus-resident trustee requirement applies only while the trust is governed by Cyprus law, extends the Law to trusts already established under the 1955 Trustees Law, and confirms that a change of governing law to Cyprus converts a trust into a Cyprus express trust from the date of the change. It would also change the limitation period in the firewall provision so that fraud claims run for two years from discovery, or from when reasonable diligence would have revealed the fraud, rather than two years from the transfer.

None of this is law yet. The bill could change materially in committee, and the current conditions continue to apply until it is enacted.

Practical implications

Four points follow for clients considering a Cyprus trust today. First, verify the residency history of every settlor and beneficiary for the preceding calendar year before anything is signed, since a defect here is difficult to cure afterwards. Second, choose the trustee as carefully as the structure: a properly regulated Cyprus-resident trustee is a legal requirement, and its competence is what makes the structure work in practice. Third, do not treat the firewall as protection against liabilities that already exist, and plan the settlement well ahead of any foreseeable dispute. Fourth, coordinate the trust with succession and tax planning elsewhere: the interaction with a Cyprus will and an Article 22 election, discussed in our article on forced heirship, and with any relocation plans, should be mapped out together. Those setting up a trust now should also ask their adviser how the deed will accommodate the proposed reform, since a well-drafted deed can be written to remain sound under either regime.

This article is provided for general informational purposes only and does not constitute legal advice. Specific legal advice should be sought before taking any action in reliance on the contents of this article.