Taxing of Local and International Trusts & VAT Issues

• Resident Trusts
  • Companies
  • Individuals
• International Trusts
• VAT

There are no specific provisions for the taxation of trusts except sec31 "Chargeability of Trustees" and sec32 " Chargeability of agent of person residing out of the Republic" of the Income Tax Law.

Resident Trusts

Income of the trust is assessed in the name of the trustee, in the same way that a person (the beneficiary) would be chargeable if they had received the money personally, and entitled to any exemptions or deductions allowable.

Companies

Taxation of trustee resident companies is at 10% in respect of world-wide income. (See Taxation of Companies & VAT Issues)

Individuals

Taxation rates of resident individuals (residency requires a stay in the republic for a period (or periods) exceeding 183 days in the year of assessment) are as follows

Dividends regardless of whether received by resident or non-resident individuals or corporations are exempt from income tax.

• SDC of 15% on dividends received applies to
  • resident individuals receiving dividends from a Cyprus company (withheld at source)
  • resident individuals receiving dividends from a non-Cypriot company (remitted by individual)

Interest income for resident and non resident individuals is 100% exempt.

• SDC of 10% on interest income from whatever source (Cyprus or overseas) earned by a resident individual is payable.
• No SDC is applicable to non-residents on interest earned in Cyprus

Other taxes which may apply, where source is linked to Cyprus, include

• Capital gain tax (20%) if the property is situated in Cyprus
• Immovable Property tax
• Stamp Duty

Trustees are required by income tax law to do what is required for the purpose of assessment and payment of tax.

Back to top

International Trusts

The income of an international trust which is received from non-Cypriot sources is exempt from any tax under the international Trust Law of 1992 Law 68(I)/92. An international trust is one whose property is located and income derived outside Cyprus.

The income of any other offshore trust, that is a trust whose beneficiaries are non-residents and its income is derived from overseas is similarly exempted from income tax.

If income arises to any trust whose beneficiary is a non-Cyprus resident the income is exempt if the exemption would apply to a non-resident person.

Where the beneficiary is a resident the taxation of the trust income is the same as that of a resident person, i.e. company or individual.

The tax residence of the Trustee is immaterial.

Back to top

VAT

The trust may, through the trustee, own assets or businesses that engage in the supply of goods and/or services.  The requirement for VAT registration will depend on whether the business has passed the VAT threshhold of €15,377 for that income year. 

Companies under the trust have an obligation to register the company for VAT purposes.

Partnerships under the trust are registered for VAT in the name of the partnership, not the individual persons carrying on that business, thereby ensuring that the VAT registration continues uninterrupted regardless of new or exiting partners.

Back to top