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Trust and Fund Registration

The questions of proprietor’s anonymity and protection of successor's interests has been raised in recent years. It is obvious that classic offshore companies cannot satisfy the requirements fully on the matter.

That is why further to “classic offshores” new instruments appear. One of them is registration of trusts and funds which allow achieving main goals more nearly, successful and effective.

The main idea of Trust registration can be observed easily. One person who is a founder makes property to another body (a trustee) in order the trustee was the owner of the assets which are separate from other private assets of the founder (so called Trust Fund). The trustee negotiates deals with the assets in behalf of the founder or beneficiary, or/and provides other activities specified in Trust.

Main purposes of Trust registration

  1. Assets protection. Third parties’ claims and complaints cannot be addressed to the assets placed into trust.
  2. Tax optimization and good tax planning opportunities.
  3. Best alternative to a will. Trust registration permits several beneficiaries (and also several trustees) who will have advantages to receive assets (while the founder is alive or post-obit).

Features of ownership by Trust

On the one side trust has a serious disadvantage which needs to be mentioned here. The disadvantage is the point that you lose full and direct control under your assets. But on another side this disadvantage has a positive point, as Trust agreement does not contemplate its denouncement unilaterally and will hardly be admitted by court as fictitious. In its turn this fact protects your assets from claims of third parties.

Trusts in different jurisdictions

1) English Common Law

Primordial concept of Trust belonged to so called English Common Law.

Registration of Trust derives from making a written or verbal agreement between a founder and a trustee. State registration is not always compulsory but can be done on a voluntary basis.

Trusts are widespread in such jurisdictions as the BVI, Panama, Belize, Cyprus, New Zealand and some other countries.

2) Continental Law

Legislation of most countries with Continental Law (for example, the Russian Federation) does not have a concept of Trust as it is.

However some European countries (for example Liechtenstein) not only admit Trusts registered in the countries with the Common Law but also formalize in legislation a possibility of setting-up both Trusts and other legal entities so called Funds (Foundations) which are singular derivative trusts.

 Admission of Trusts by jurisdictions with different legislation

The countries with the legal system of the Common Law admit Trusts mutually. But if the assets are in the country with the legislation which does not admit Trusts (for example, the Russian Federation) and the assets need be transferred, the question of trust agreement’s legitimacy admission arises as well as the question of passing of property from the Trust founder to Trustee.

A popular alternate to complete the devise is not to transfer the assets (property, stocks, company shares, etc.) straight into Trust but first to register the assets in the name of offshore company registered in the country with the Common Law. Then the shares of the offshore company are transferred into the Trust which beneficiary is a resident of the Russian Federation.

The British Virgin Islands

Features of Trust registration in the BVI

1. Maximum length is 150 years;

2. Trust agreement is not subject for state registration; only stamp duty must be paid. Therefore full confidentiality of both a founder and a beneficiary attains;

3. Beneficiary can control Trustee through appointment of Trust Protector;

4. Tax exemption on trust profits and capital gains if beneficiaries are not permanent residents of the BVI.

Features of the Virgin Islands Special Trusts Act – VISTA

At the present time The Virgin Islands Special Trusts Act (VISTA) allows to set-up special VISTA trusts, which avoid all traditional difficulties of the Common Law trusts (formal loss of control under property, etc.) Mandatory requirement of Trustee to run the company personally is excluded. The law allows Trustee to interfere the company’s activity and management only for the purpose of solving questions which are specified in Trust Agreement.

We recommend applying VISTA Trust:

1. If the founder wants to keep control under the assets put into Trust in the order of director.

2. If the founder wants to put shares or real assets of captive company into Trust.

3. If the founder wants to avoid Trustee involving.


At present Cyprus is considered as one of the leading jurisdictions in the UE for setting-up common law trusts. Cyprus Trust Law closely follows English Trust Law. These are the Trustees Law, Cap. 193 of the Cyprus Code, which was enacted in 1955 and the International Trusts Law 69 (I), which was enacted in 1992 and regulates the creation and functioning of an ‘international trust’ and is considered to incorporate modern trends in the field of international trusts.

Types of Trusts in Cyprus

1. Resident Trust. Both a founder and a beneficiary are permanent residents of Cyprus, and the trust activity is subject for exchange control.

2. Offshore Trust. None of the beneficiaries is a permanent resident of Cyprus, and the trust assets are situated out of Cyprus territory.

3. International Trust. The form is widely used by foreign trust founders. The main features:

- the trust founder must not be a permanent resident of Cyprus, can be a natural person or legal entity;

- the beneficiary must not be a permanent resident of Cyprus, can be a natural person or legal entity;

- at least one trustee must be a resident of Cyprus, can be a natural person or legal entity;

- a trustee can also be a beneficiary but only if the trustee is not a single beneficiary or trustee in the trust;

- the trust founder can specify that that any activity of the trustee must be first approved by the trust protector who is an independent person for the trust;

- the length of trust can be no more than 100 years;

- trust agreement is not subject for state registration, only stamp duty must be paid;

- any immovable property satiated in Cyprus can not be transferred into international trust;

- the income and gain of an international trust derived from sources outside Cyprus is exempt from all kinds of tax in Cyprus;

- all paperwork and documentation must be done in English language.


Confidentiality and data anonymity is one of the main positive aspects of Cyprus legislation. The settlers, trustees and beneficiaries should not disclose information to third parties relating to international trusts, unless a Cyprus Court orders the information to be disclosed. The following data is prohibited for disclosure to third parties:

- real trust founders’ and beneficiaries’ names;

- directions from beneficiary to trustee of the assets management;

- trust banking accounts;

- trust fund structure and assets placed into trust;

- documents which trustee signed including power of attorney issue, etc.


1. Trustee must disclose all data about banking accounts open in the name of the trust and about all documents signed by trustee in the name of the trust to the trust beneficiary.

2. Trustee may disclose the above mentioned information in a juridical procedure if Cyprus court received an inquiry from another court about criminal case, studied the case, considered such data disclosure expedient and ordered the information to be disclosed.

Trust formation

1. Generally trusts execute in the form of trust agreements. Trust founder determines clauses, powers, rights and abridgements of trustee.

2. There are neither requirements on trust state registration nor rendering its accounts in Cyprus. Central Bank of Cyprus is the only regulating authority but it needs to be informed only in case of International trust owning shares of a Cyprus company.

3. The stamp duty in the amount of EUR 427,15 must be paid for trust registration. The amount of trust funds does not influence the amount of stamp duty.

4. To avoid the risk of declaring illegitimate the trust must respond three classic requirements: contemplation, subject matter, and beneficial owners. In other words the founder must specify the purposes of trust formation, trust fund must be exactly determined at the time of formation, and trust beneficiaries must be known.

Change of trust domicile (re-domicile)

International trust law contemplates to change Cyprus trust domicile to another jurisdiction and back on the following terms:

1. Trust agreement must include a clause of domicile change possibility;

2. Cyprus law demands that the jurisdiction where trust is displaced to must admit legitimacy of the trust and the beneficiaries’ rights.

3. If trust is domiciled to Cyprus from another jurisdiction such displacement must be done within the law of the jurisdiction where the trust is displaced from.

Trust taxation

Any profit received by trust is not subject for taxation in Cyprus including dividends, interests, royalty, gains of disposal of assets, etc. International trust also is not subject for capital gains.


The jurisdiction is popular for trust formation because of the country’s prestige, closed nature and location accessibility. Beside trust form as it is Liechtenstein offers some other legal forms of organization:

1. Trust organization is a trust which is set up as a legal entity (according to the common law trust is simply an agreement). The structure of trust organization (trust agreement, founder, beneficiary, and trustee) completely responds the structure of the common law trust, but additionally trust organization is a subject for state registration as a legal entity, and can run commercial activity. Among disadvantages we could mention requirements on accounts and audit.

2. Registration of Fund (Foundation) is rather a comfortable mix of elements of both trust and legal entity. By its idea it is exactly a trust of the continental law. Fund is a separate legal entity which has its founder, beneficiary and trusty, where the functions of the trustee can be also strictly determined by appointing a fund protector. Authorized capital of fund is not divided into shares or parts. Fund in Liechtenstein is subject for state registration. The only exemption is a Family fund which can be registered simply when you deposit the memorandum of association into the state register. Moreover the document is not accessible to third parties. Such fund has got a strictly determined purpose and any fund activity can be done only for such purposes as family funds, inheritors, study payments, etc. So this form is generally used by clients as a holding company as a center for saving profits and also for inheritance planning. Any type of passive income is not considered as commercial activity. If compare with other funds, Family fund is not an income tax payer in Liechtenstein, and that is why Family funds are widely used in tax planning. Family fund can receive any world income but must pay only annual state fee.

3. Organization is a Fund which has the right of commercial activity. If there is commercial activity, the activity is subject for audit or accounts (by a simplified system) same as Trust.


If Trust (Fund) does not run commercial activity it is not subject for income tax and capital gains tax.

Annual capital tax (state fee) is 1000 Franks is applied. Also for registration you must pay so called stamp duty and registration fee.

If beneficiaries are not permanent residents their income is not subject for taxation in Liechtenstein.

Questions of anonymity

To keep founders’ anonymity Liechtenstein advocates provide nominee service of shareholders and can act as nominee founders even is case of state registration. In cases when trust or fund is subject for state registration then only Memorandum of Association is registered with the data on the fund’s title and nominee founders (names of beneficiaries and all payment details are specified in a separate agreement which will be kept with the real founder and the advocates providing this nominee service).

It is worth to mention that advocates have a legal right to refuse answering all questions concerning the assets of fund even in the court, because the right is provided by the institute of advocate secrecy and is strictly followed in Liechtenstein.

New Zealand

New Zealand applies to progressive system of taxation (33%-39%).

But convenient vehicle allows using New Zealand companies for optimal schemes of taxation strictly following both domestic and international laws. Here we are referring to a non-resident New Zealand trust where Trustee is a New Zealand company. Trust profit can be tax exempted in New Zealand if trust has got a particular structure.

New Zealand trust is non-resident if:

1. the trust founders are not permanent residents of New Zealand;

2. the trust beneficiaries are not permanent residents of New Zealand;

3. the income sources of the trust are situated out of New Zealand territory;

4. immovable property transferred into the trust is situated out of New Zealand territory;

5. the trusty can also be a New Zealand company which is a permanent resident of New Zealand.

This tax regime is a consequence of the legislator’s conscious concept concerning taxation of non-resident trusts which is inalienable part of tax legislation passed in 1988. The concept consolidates that there is no economic reason for trust taxation if founders, beneficiaries and income sources are situated out of New Zealand territory. In case when a New Zealand company is a trustee it acts as an economic agent of the founder and that is why trustee is also tax exempted from trust income tax.

Features of Trust in New Zealand

1. New Zealand company can be a trustee of one trust only, no special licence needed;

2. No requirements on state registration of trust or trust agreement. Furthermore there are no requirements to submit information about shareholders and beneficiaries as well as to give accounts and perform audit of trust activity;

3. Beside managing an estate trust can also run commercial activity;

4. Wide possibilities for trust shareholder to control activity of trustee.


Features of Trust registration in Panama

- Trust in Panama can be set up for any purpose which is not contradicted the applicable legislation and public order.

- Trust can be created in the form of written and notarized agreement between a founder and a trustee.

- Trust can not be open-end unless it is specified by the founder. Trust can be revoked. Trust agreement can determine indemnity period if the founder wants so.

- Disclosure of information without prejudice to the civil liabilities is subject for 6 months jail time and a fine of USD 50’000.

- Founder, Trustee and Beneficiary can be legal entities.

- Trust is exempted from payment of any taxes.

- The assets placed into trust are separate from private assets of Trustee. That is why the assets can not be arrested, and third parties claims can not be addressed to the assets.

- In spite of the fact that trust must be regulated by Panamanian law, the founder and the trustee can determine in the trust agreement which foreign law will be applied. Trust and trust fund can be re-domiciled to another jurisdiction.

- Trustee can be either a natural person or a legal entity. The founder may change the trustee into another one if it is contemplated in the trust agreement.

Panamanian legislation also provides a possibility of the Panama Private Foundation (PIF) which is similar to Liechtenstein fund. PIF has its origins in the Law 25 of 1995, which in turn was inspired in the PGR or better known as the “Liechtenstein Persons and Company Act” that contains one of the first references to the private non-profit foundations. A PIF is a legal entity that can be created by either a natural person or a corporation that later transfers part or all of his/her assets to the Private Foundation so they can be managed and protected in favour of the Beneficiaries. The main advantage here is the Panamanian legislation which does not render rights of survivorship for interest.