CYPRUS Law and Practice Contributed by: Alexis Erotocritou, Dafni Loizou and Georgia Demou, A.G. Erotocritou LLC
2.6 Transfer of Assets: Vehicle and Planning Mechanisms As described in 2.5 Transfer of Property , the trans- fer of assets between relatives up to the third degree is generally not subject to tax. Furthermore, Cyprus does not impose inheritance, estate, or gift tax. There - fore, there may be no need for specific planning in transferring assets owned by individuals to younger generations. However, if the assets are held under a Cyprus tax resident company, tax planning may be required for transferring the assets to the younger generations tax free. Cyprus Income Tax Law includes provisions for tax free re-organisations (eg, mergers, de-mergers, par - tial divisions, exchange of assets) through which the assets could be transferred to younger generations tax free. Having said this, tax planning is highly recommended before setting up any structure, taking into account that the main planning tool include lifetime gifts (includ - ing tax-free transfers of immovable property between close relatives), the creation of a Cyprus International Trust (CIT) or local trusts (as may be applicable on a case-by-case basis), and family holding companies, which allow parents to transfer shares gradually in a tax-efficient manner. 2.7 Transfer of Assets: Digital Assets Cyprus succession law does not have a separate stat - utory regime for digital assets. Instead, digital assets, such as cryptocurrency, tokenised assets, online accounts, cloud-stored data and email accounts, are treated as part of the deceased’s movable estate under the Wills and Succession Law and the Admin - istration of Estates Law. As a result, although this is not well tested or established, such assets may pass under a Cyprus will, under statutory succession, or under a foreign law chosen pursuant to Brussels IV. In practice, the main issues relate to access and con - trol, not legal entitlement. Service providers (email platforms, cloud services, social-media companies, exchanges) apply strict privacy and security policies and typically require probate documents, and in some
cases a court order, before releasing account access or data. For cryptocurrency, heirs can only administer the asset if they have the private keys, seed phrases or wallet credentials; without these, the asset cannot be recovered. As with most jurisdictions, this is a relatively new area of law and has not yet been sufficiently tested in the courts. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Generally speaking, there are a number of main vehi - cles for tax-efficient wealth structuring in Cyprus, such as the CIT, foundations, family investment companies (FIC) and companies limited by guarantee. These options are summarised below. CITs • Use: estate planning during lifetime, asset protec - tion, possibility of avoiding the forced heirship rules. • Advantages: high flexibility, confidentiality, creditor protection, tax-neutral for non-resident settlors/ beneficiaries. • Limitations: settlor and beneficiaries must not be Cyprus tax residents in the year before creation. Cyprus Foundations • Use: civil law alternative to trusts. Suitable for fam - ily governance, or commercial holding structures. • Advantages: long-term continuity. They can oper - ate like family foundation with council/guardian oversight. • Limitations: heavier compliance, auditing and Registrar supervision. They are generally more complex to set up and not as tried and tested as other vehicles. FICs • Use: passing control and economic rights to younger generations through share classes, hold - ing family assets.
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