CYPRUS Law and Practice Contributed by: Alexis Erotocritou, Dafni Loizou and Georgia Demou, A.G. Erotocritou LLC
(e) Banking secrecy is no longer available for tax purposes. • EU DAC 6 – Mandatory Disclosure Rules: Cyprus applies EU DAC 6 rules and maintains a benefi - cial ownership register to prevent tax abuse and improve transparency. Information is shared with authorities but not fully public, balancing compli - ance with privacy. 2. Succession 2.1 Cultural Considerations in Succession Planning In Cyprus, succession planning is strongly influenced by close knit families and there is a preference for keeping wealth, land and family businesses within the family alongside a desire to treat children fairly. Older generations may be hesitant to transfer full control during their lifetime, especially over real estate or fam - ily businesses, so planning often focuses on contin - ued control and an orderly transfer of wealth. In light of this, as generations pass, the families grow larger and there is a recurring theme of either new genera - tions not wanting to take over the family business or disputes between family members. Accordingly, older generations are seeking tax effi - cient ways to turn over wealth to the younger genera - tions, and where possible, sell the business so that younger generations can make a fresh start. Separately, Cyprus forced heirship rules are also important, as they can restrict full testamentary free - dom and make early planning necessary for desired outcomes (as further outlined in 2.3 Forced Heirship Laws ). 2.2 International Planning Cyprus residents, locals and high net worth individu - als (HNW) relocating to Cyprus often have:
This may create cross-border conflicts between Cyprus laws and practice, foreign inheritance rules and foreign tax regimes. All of these need to be taken into account when succession planning is undertaken, to ensure that such clients/individuals achieve ade - quate planning in the most efficient and appropriate way. 2.3 Forced Heirship Laws Cyprus applies forced heirship rules under the Wills and Succession Law, where the deceased was domi - ciled in Cyprus, at the time of death. These rules outline a fixed statutory portion of the estate to pass to close family members, such as a spouse, children or, in certain cases, parents (depend - ing on who the surviving close family members are), while only the remaining disposable portion may be freely distributed by will. In practice, this means that individuals cannot freely elect to whom their estate will pass upon death. Accordingly, if they have spe - cific wishes, they will need to take appropriate action during their lifetime. Generally speaking, lifetime gifts, trusts and other holding structures may also be con - sidered as mechanisms for managing succession outcomes. Additionally, Cyprus, as a member of the EU, is bound by the European Succession Regula - tion (EU) No 650/2012 (commonly called the Brussels IV Regulation), which offers certain mechanisms (like Choice of Law under Article 22 and Agreements as to Succession under Article 25) that may be employed in order to circumvent forced heirship restrictions in cer - tain circumstances, subject to proper estate planning. In cross-border cases, however, there may be greater flexibility. Non-Cyprus-domiciled individuals may be able to rely on the law of their nationality or another applicable foreign law, particularly where the EU Suc - cession Regulation (Brussels IV) is relevant. This, ulti - mately, depends on the exact circumstances so it is considered and assessed on a case-by-case basis. 2.4 Marital Property In Cyprus, unlike some other jurisdictions, marriage does not automatically alter the property rights of the spouses and does not automatically create a com - munity of property or joint-property regime. As a start - ing point, property acquired before the marriage or
• heirs living in different jurisdictions; • assets abroad/outside of Cyprus;
• mixed tax residencies within the same family; and • exposure to forced heirship rules, foreign estate taxes and/or issues and concerns arising from double taxation treaties.
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