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Cyprus has become a premier destination for creating trusts, thanks to its robust legal framework and generous tax incentives.
The concept of a trust, considered one of the most significant legal innovations in English jurisprudence, allows individuals and corporations to meet various objectives, such as asset protection, estate planning, and confidentiality.
In Cyprus, the legal system supports a wide range of trust types, including fixed trusts, discretionary trusts, and charitable trusts, each designed to serve different needs.
One of the most notable trust structures in Cyprus is the “international trust.”
Following the 2012 amendments to the International Trusts Law 69(I)/92, Cyprus has become one of the most competitive jurisdictions for establishing international trusts, offering unique benefits compared to other locations.
This type of trust allows individuals to take advantage of the country’s favorable legal and tax environment while enjoying significant flexibility.
To create a Cyprus international trust, certain criteria must be met:
The term “resident” refers to someone who resides in Cyprus for more than 183 days in a tax year or a company that is managed and controlled within Cyprus.
Setting up a Cyprus international trust provides numerous benefits, including:
These trusts offer an excellent solution for high-net-worth individuals seeking strategic asset planning, particularly for those with complex family arrangements.
Settlors can reserve certain powers when establishing a Cyprus international trust.
These powers might include the ability to revoke or alter the trust, appoint or remove trustees or other key positions, or give specific instructions to the trustee.
Cyprus international trusts can continue in perpetuity, as the rule against perpetuities has been excluded.
The 2012 amendments to the Cyprus International Trusts Law have positioned Cyprus as a leading jurisdiction for setting up international trusts.
The comprehensive legal framework provides unparalleled protection and flexibility, allowing settlors, trustees, and beneficiaries to structure their family or business arrangements to meet their unique needs and objectives.
With these advantages, Cyprus stands out as an attractive destination for creating trusts with significant tax benefits and legal security.
If you have any queries about this article on Cyprus Trusts, or tax matters in Cyprus more generally, then please get in touch.
If you are a tax adviser – whether from a legal or accountancy background – then we would love to discuss how you can become one of our ranks of Tax Natives.
All you need is your local tax knowledge of Cyprus and any other regions around the world!
For more information please see here or get in touch.
A bustling hotel lobby in Lisbon, Portugal, filled with a mix of travelers and locals enjoying the serene atmosphere. The decor features traditional Portuguese tiles and modern furniture, creating a vibrant yet cozy environment.
The scene begins with “Tax Natives,” a poised journalist with a keen eye for detail, sitting across from our “Secret Adviser,” a well-regarded tax consultant known for their expertise in Portuguese tax law. They’re seated at a small, round table adorned with a floral centerpiece.
[smiling, as they take a sip of espresso]: “Thank you for meeting with me today in such a lively setting. Let’s dive right in. Can you explain how an individual becomes taxable in Portugal?”
[leaning back comfortably, gesturing towards the window where a tram zips by]: “Certainly. In Portugal, tax residency hinges on a few key factors. If someone spends more than 183 days, consecutively or otherwise, within Portuguese territory during any 12-month period starting or ending in a fiscal year, they’re considered tax-resident. Also, having a habitual residence here during any part of that period suggests an intention to maintain and use it as such.”
[A waiter momentarily interrupts, offering a plate of pastéis de nata, which both politely decline with a chuckle before continuing the discussion.]
“And what about the types of income that are taxable for these residents?”
[nods, picking up a napkin and doodling a quick chart]: “Taxable income under Portuguese Personal Income Tax, or PIT, includes employment income, business and professional income, capital gains, and more. Each category has its specifics, like capital income from dividends and interests taxed generally at 28%, with certain exceptions.”
[laughs as a child zooms past their table chasing a balloon]: “Seems like navigating tax law here is as challenging as catching that balloon! Now, what about non-residents?”
[smiling at the scene]: “Non-residents are only taxed on their Portuguese-sourced income. This includes employment performed in Portugal or income from Portuguese real estate.”
Tell us about the Non-Habitual Residents regime which applied for certain new migrants to Portugal. It was almost mythical in its status and was a huge success. What has happened to it?
[Laughs] “As mythical as the unicorn! It was good whilst it lasted. However, the NHR regime was terminated effective January 1, 2024. It still applies to taxpayers who were grandfathered in. In other words, those who qualified to apply for the regime in 2023 and became tax residents of Portugal up until December 31, 2024. The NHR status was particularly attractive because it provided beneficial tax treatment for certain types of non-Portuguese income for its users. For example, they might be able to enjoy overseas income in Portugal without any tax.”
“Unicorn indeed! How does Portugal handle capital gains tax?”
“Capital gains are typically taxed at 28%. But if you’re selling shares of entities in offshore jurisdictions, you’re looking at a 35% rate. Interestingly, gains from real estate are taxed on only 50% of the gain at progressive rates.”
[A hotel staff member accidentally knocks over a decorative vase in the background, causing a slight commotion but quickly resolved.]
“And what about other taxes, like on gifts or inheritance?”
“Portugal does not impose a gift tax per se, but stamp duty might apply at a rate of 10%. Inheritance involving assets in Portugal also triggers stamp duty unless exempted by relation, such as between spouses or direct descendants.”
[scribbling notes furiously]: “One final question, what are the peculiarities of non-cash assets taxes?”
“Importing non-cash assets like vehicles incurs various taxes and fees. VAT applies universally, adjusted by the type of goods and the value of transactions.”
[Both stand, signaling the end of the interview.]
[extending a hand]: “Thank you for these insights. I believe our readers will find them extremely valuable.”
[shaking hands]: “It was my pleasure. Always happy to clarify these complex topics.”
If you have any queries about this article on Private Client Tax in Portugal, or tax matters in Portugal more generally, then please get in touch.
If you are a tax adviser – whether from a legal or accountancy background – then we would love to discuss how you can become one of our ranks of Tax Natives. All you need is your local tax knowledge of Portugal and any other regions around the world
! For more information, please see here or get in touch.
Spring Budget 2024 delivered a shock to the system. Facing a ruinous election, it is almost as if the Tories were left with one option to steal Labour’s thunder and abolish the non-dom regime themselves.
I am sure they enjoyed themselves in the commons bar afterwards.
However, as the Bard once said, “these sudden joys have sudden endings. They burn up in victory like fire and gunpowder.”
Will the proposals supercharge the UK economy – or do they simply look like the actions of economic arsonists?
Regardless, recent missives from the Labour Party indicate a commitment to not only retain the Government’s proposal, but to further fortify them.
Removing the few silver linings in those original proposals.
New arrivals to the UK who qualify for the new regime will benefit from a full exemption on foreign income and gains for the first four years that they are resident for tax purposes.
In contrast to the current remittance basis, those foreign income and gains (“FIG”) can be brought to the UK without penalty at any time (as long as they arose in the four year window).
After the four year window has closed, they will be taxed like any UK resident and domiciled taxpayer.
The new regime will potentially apply to:
New arrivals must have had a continuous absence from the UK for a period of ten years.
Those who are already in the UK may benefit as well, although the window may be much narrower. This is because they will need to have been tax resident for fewer than four tax years from 6 April 2025. They can benefit until their four years are up.
The above is relatively straightforward. The issues will arise when it comes to dealing with those who have been in the UK for much longer and might also have established trusts and other entities reflecting their status.
We are told that there will be the following transitional rules:
We were told that all new foreign income and gains that arise within a trust from 6 April 2025 will be taxable.
However, where such income and gains arose in such a trust before 6 April 2025, then it will not be taxed unless:
The main connecting factor that determines a person’s exposure to IHT is domicile. So, if we are digging a hole and burying the concept for tax purposes, what is to be done here?
Under vaguer proposed rules, a new test such that a person would only be subject to IHT once they had been resident in the UK for 10 years. On the other hand, exposure to IHT would only be lost when the person had been resident outside the UK for a further 10 years.
It will be interesting to see if those who have remained domiciled in UK domiciliary can escape the scope of IHT on worldwide assets 10 years after leaving the UK, but it appears this may be the case based on the information available so far. If so, this could be seen as a major ‘sweetener’ for expats.
However, notably, we were told that the treatment of non-UK assets settled into a trust by a non-UK domiciled settlor prior to April 2025 would not change and remain excluded property (subject to existing exceptions).
Following the release of a document from Labour’s PR team, and oddly not to be located on their website, they have now formally set out their own proposals.
Labour asserts that its plans on IHT will raise an extra £430m each year in extra IHT. However, the evidence for such claims is pretty shaky.
The Tories proposals seemed like shot in the arm – for all those other jurisdictions looking to attract global wealth, anyway.
The fact that Labour wants to push the envelope even further might be politically bold – but might look like economic self-sabotage.
As Billy boy said, “All the world’s a stage, and all the men and women merely players. They have their exits and their entrances.
The question here is will there be more exits or entrances?
Let’s hope there is no Shakespearean tragedy.
If you have any queries about this article on Labour’s Further Changes to Non-Dom Regime, or UK tax matters in general, then please get in touch.
In a significant policy shift outlined in the Spring Budget 2024, Chancellor Jeremy Hunt has announced comprehensive reforms to the tax treatment of non-UK domiciled individuals (non-doms) residing in the UK.
These changes, aimed at restructuring the non-dom regime, will notably impact potential purchasers of UK property.
Here, we delve into the key aspects of the proposed adjustments and what they mean for buyers of UK real estate.
Non-doms are individuals whose permanent home is not in the UK, yet who spend part of the year living in the country.
Under the current system, non-doms can avoid UK tax on their foreign income and gains (FIG) by not bringing these funds into the UK, leveraging the ‘remittance basis’ of taxation.
The UK Government plans to eliminate the non-dom regime, transitioning to a new residence-based tax system effective from 6 April 2025.
Under this new regime, individuals moving to the UK after spending at least a decade abroad will enjoy a four-year period during which they are exempt from UK tax on their worldwide FIG, regardless of whether the income is brought into the UK.
The transition period in 2025/26 and 2026/27 will also introduce specific reliefs.
It’s important to note that while the UK Inheritance Tax (IHT) exposure for non-UK assets may change under the new rules, the IHT treatment for UK residential property remains unchanged.
This means all property owners, regardless of their domicile status or eligibility for the four-year exemption, will still face IHT on UK properties.
For non-residents purchasing UK property, the upcoming changes will have no direct impact, provided they manage their days spent in the UK carefully to avoid becoming tax residents.
Conversely, those relocating to the UK might find the new regime more favorable, as they can bring FIG into the UK without tax implications for the first four years of residence—a simplification of the current system.
However, buyers planning a long-term move should consider the broader implications on their worldwide assets, as residing in the UK beyond four years subjects their global FIG to UK tax, and a ten-year stay brings their entire worldwide estate under the UK IHT regime.
Investors purchasing properties for their children or for investment purposes need to consult with advisors to navigate the best funding strategies and understand their IHT exposure.
A Singaporean buying a property in Mayfair for rental and capital appreciation purposes will remain unaffected by the tax regime changes, given their non-resident status.
However, the tax rate on gains from UK residential property sales will adjust from 28% to 24% starting 6 April 2024.
A couple from the Middle East buying a London property for short stays will need to carefully manage their time spent in the UK to avoid residency and its tax implications.
Consulting with tax advisors is crucial to understanding the residency thresholds.
An American buying a flat in London for his daughter presents a unique case due to the US’s global taxation on citizens.
The entrepreneur might face lesser impact from the UK’s tax changes and should explore ways to optimize his tax position, considering the US and UK tax obligations.
These changes mark a pivotal moment for non-dom individuals engaged in the UK real estate market.
It’s imperative for potential buyers and existing non-dom property owners to seek comprehensive advice to navigate the evolving tax landscape effectively.
Final thoughts
If you have any queries on this article on the Spring Budget 2024: Implications for Non-Dom Real Estate Buyers, or UK tax matters more generally, then please get in touch.