CYPRUS Law and Practice Contributed by: Alexis Erotocritou, Dafni Loizou and Georgia Demou, A.G. Erotocritou LLC
5. Wealth Disputes 5.1 Trends Driving Disputes
ing the tax liabilities, making the payments on behalf of the beneficiaries, filing the tax returns, etc).
Wealth disputes in Cyprus are becoming more fre - quent and more sophisticated, reflecting both regula - tory developments and changes in the way private wealth is held and transferred. Increased transparency obligations arising from EU anti-money laundering (AML) legislation, the CRS, sanctions and asset-freez - ing measures, and beneficial ownership disclosure requirements have resulted in greater scrutiny of wealth structures and, in some cases, have fuelled disputes concerning the administration of assets, access to information and the rights of beneficiaries. Another notable development is the ongoing trans - fer of wealth between generations. As ownership and control of family businesses, real estate and other sig - nificant assets pass from one generation to the next, disagreements often arise over succession planning, governance, expectations of inheritance and the dis - tribution of family wealth. These issues are particu - larly acute where lifetime arrangements are informal or where different family members have played vary - ing roles in the preservation or growth of the family’s assets. Estate and succession disputes commonly involve challenges under Cyprus’ forced heirship regime, as well as claims concerning the validity of wills, lifetime gifts and other succession arrangements. Allegations of fraud, forgery, undue influence, lack of capacity, broken promises, proprietary estoppel and unequal treatment between heirs are also regularly encoun - tered, particularly in high-value family estates. Trust disputes typically centre on the conduct of trus - tees and the administration of trusts. Common claims include breach of fiduciary duty, disputes over the validity of trust structures, allegations of fraud or dis - honest assistance, challenges brought by creditors or spouses seeking to reach trust assets, and claims that assets were transferred to defeat creditors, including under the Fraudulent Transfers Avoidance Law within the applicable two-year limitation period. Given the international profile of many Cyprus-based wealth structures, disputes increasingly have a cross-
4. Family Business Planning 4.1 Asset Protection
The most commonly used asset protection structure in Cyprus is a trust and, in particular, where applica - ble, the CIT. Trusts are widely used to shield family wealth, separate personal assets from business or creditor risk and facilitate long-term succession plan - ning. They remain popular because assets transferred into the trust cannot be challenged by creditors unless certain criteria are met, for example, the transfer was made with proven intent to defraud. The main limitations are that a CIT must satisfy the statutory conditions and will not protect assets from pre-existing creditor claims, fraudulent transfers, sham arrangements, improper administration, or structures where the settlor retains excessive control. Trustees are subject to AML/KYC obligations and must register the trust in the Cyprus Trusts Register, which reduces confidentiality even though the register is not public. Cyprus-source assets, especially Cyprus immovable property, may still be exposed to Cyprus tax and legal rules. In practice, asset protection planning requires independent professional trustees, clear trust docu - mentation, proper governance, record-keeping, gen - uine administration in Cyprus, and compliance with beneficial ownership, AML and reporting obligations. 4.2 Succession Planning Please refer to 3.1 Types of Trusts, Foundations or Similar Entities . 4.3 Transfer of Partial Interest The market value depends on whether such transfer is treated as disposal or as a gift between relatives up to the third degree. If the transfer is made as a gift/inheritance to a rela - tive up to the third degree of kinship, the cost of the transferor is taken into account. In other cases, the market value is taken into account.
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