The Cyprus Foundation
A Foundation is neither a company nor a trust but has some similarities to both. It is an incorporated body that, unlike a trust, is a distinct legal entity that can own assets, enter into contracts with third parties and sue or be sued in its own name. Unlike a company, however, a Foundation has no shareholders.
For wealthy individuals from civil law or Islamic jurisdictions, where the trust concept is not traditionally recognised, establishing Foundations is an attractive alternative to the Cyprus International Trust. Cyprus is well-suited to Foundations because it has a mixed legal system. Although it is primarily a English common law jurisdiction, it integrates elements of European civil law as well as EU law.
Foundations can be used to manage assets dedicated to specific non-profit objectives, such as charitable activities or succession planning. They offer a structured way to protect family wealth, allowing assets to be managed and distributed to family members in line with the founder’s wishes, as well as a means to circumvent forced heirship rules.
As a separate legal personality, a properly structured Private Foundation offers continuity, which can make it ideal for developing business interests or acquiring assets, including Cyprus immovable property. They also provide a platform for wealth management, family and succession issues while supporting philanthropic objectives.
The Cyprus Legislative Framework
Cyprus introduced new foundation legislation in 2017 under the Associations and Foundations Law (104(I)/2017), which abolished and replaced the previous legislation relating to associations, foundations and clubs. It has been further amended by laws 76(I)2018, 84(I)/2019 and 118(I)/2020.
Law 104(I)/2017 provides a basic definition of a Foundation, which refers to the totality of the assets intended to serve the implementation of a particular not-for-profit objective. They can be established for both public-benefit and private-benefit purposes.
The Law defines a ‘not-for-profit organisation’ as a Foundation or association that does not distribute any profits that may arise from its activities to its members, its founders, its board of directors or its officials, but invests or uses those profits toward the continuation and achievement of its objectives. Any surplus should be invested directly for the achievement of the objectives and cannot be distributed.
Only Foundations established for public-benefit purposes qualify for tax benefits under Cyprus income tax laws. Public-benefit purposes include the promotion of specific objectives outlined in law, including education, health, arts, culture, science, sports, human rights, environmental protection, religion, charity or any public purpose.
Uses of Cyprus Foundations
Cyprus Foundations are used for a wide range of private and public purposes, including:
- Succession and estate planning – preserving and transferring family wealth across generations.
- Asset protection and wealth preservation – holding and managing assets in accordance with the founder’s wishes.
- Charitable and philanthropic activities – including education, health, culture, science, environmental protection and other public benefit objectives.
- Asset holding – directly owning real estate and other investments.
- Family governance – providing long term stability, continuity and clarity.
How a Cyprus Foundation is structured
A Foundation is established by a Founder, who contributes the initial assets (the endowment). These assets are then held for the purposes set out in the Foundation’s constitutional documents and are administered according to contractual rather than fiduciary principles.
A Foundation is governed by two key documents:
- A Charter, similar to a trust deed, which may be open to public inspection.
- Rules or regulations, similar to a company’s Articles of Association, which remain private and set out the detailed rules for administration.
Where permitted by its constitution, the Founder may retain certain reserved powers, allowing flexibility while maintaining the integrity of the structure.
Management and control
Foundations in Cyprus are administered by a Council, rather than trustees. The Council must consist of a minimum of three members, who are responsible for managing the Foundation’s assets and ensuring that its purposes are carried out in accordance with its constitution. Council members owe contractual duties, and their rights and obligations are clearly defined in the governing documents.
A Guardian may be appointed to oversee the Council’s actions, providing an additional layer of supervision, similar to the role of a protector in a trust structure.
Unlike a trust, a beneficiary under a Foundation has no beneficial interest in the Foundation’s assets and is not owed fiduciary duties by the Council or the guardian (if appointed) of a Foundation.
Cyprus Foundation Setup
To establish a Foundation, there are two key elements: a constitutive act and the approval of the Registry of Associations. The constitutive act creates a distinct legal personality for the Foundation, while registration gives it legal personality.
A constitutive act is the foundational charter – typically a notarised deed or will – which sets out the purpose, structure and rules for the organisation. Foundations in Cyprus acquire legal personality as of the date of their registration in the Register of Foundations by the competent District Officer (Registrar of Associations and Foundations).
The process for submission of the required documents was set out by the Registrar in the Associations and Foundations (Forms, Fees and Other Special Provisions) Regulations 2020. A written request for registration as a Cyprus Foundation must be submitted to the Ministry of Interior, which should include:
- The Foundation’s name and registered office.
- The Foundation’s Charter
- The Foundation’s Regulations, which must specify its non-profit objectives, its duration and the rules for its operation, together with any agreement, will or other document by which the Foundation was established.
- The names and addresses of the Foundation Council members (minimum three).
- A written assurance that no remuneration of any kind is paid for services provided by any founding member or official of this board.
- The Foundation’s objectives and duration.
- Initial assets of at least €1,000.
- The method for determining beneficiaries, if any.
The Registrar will examine the application as soon as possible, and in any event within three months of the date of submission of the relevant application and all the necessary, duly filled in forms and documentation (section 26(2) and 26(4) of L. 104(I)/2017).
If satisfied that all requirements are met and the purpose or operation of the Foundation is not illegal, the Registrar will register the Foundation in the Register and issue a certificate of registration (Article 26 (2) of L. 104(I)/2017), which will be published in the Official Gazette of the Republic of Cyprus. Publication in the Official Gazette constitutes proof of the date of registration and of compliance with all legal requirements (Article 26(5)).
Beneficial Owner Register
Foundations are also required to register their beneficial owners on the Register of Beneficial Owners. Under the Prevention and Suppression of Money Laundering Activities Laws of 2007-2021, companies and any other legal entities incorporated in the Republic of Cyprus must obtain and hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held.
In the case of Foundations, information must be filed on the Beneficial Ownership Register for each qualifying natural person beneficial owner – founder, council members, guardian and beneficiaries – as follows:
- Name, date of birth, nationality and residential address
- Nature and extent of the beneficial interest held directly or indirectly by each beneficial owner, including through percentage of shares, voting rights, or the nature and extent of the significant influence or control with other means exercised by each controlling person.
- Identification document number indicating the type of document and the country of document issuance,
- Date of any changes in the particulars of the natural person or the date on which the natural person ceased to be a beneficial owner.
Reporting and ongoing requirements
Foundations are required to prepare annual financial statements. At the end of each financial year, the accounts must be audited and submitted to the Registrar within one month of the day of completion, together with the gross income report, amounts brought forward at the beginning of the financial year, expenses account, accrued and receivables account.
A Foundation may be dissolved in accordance with its constitutional documents or by court order if its purpose has been fulfilled or has become unattainable, if it has been inactive for more than two years, or if it has acted unlawfully or outside its stated objectives.
There are no restrictions in respect of either the transfer of the seat of a Foundation in the European Union or cross-border mergers.
Taxation of Cyprus Foundations
A Cypriot Foundation can offer significant tax advantages. As a separate legal entity, a Foundation is subject to the Cyprus corporate tax regime, but as a non-profit or charitable organisation, provided all the conditions are met, its qualifying income will be exempt from income tax.
If the Foundation is considered tax resident in Cyprus it will also be eligible for withholding tax relief under Cyprus double tax treaties, the management and control of the company must be undertaken in Cyprus.
Capital Gains Tax (CGT) is charged at the rate of 20% on gains arising from the sale of immovable property in Cyprus, or the sale of shares of companies that own immovable property in Cyprus. Gains from the sale of shares listed on any recognisable stock exchange are exempt. Further exemptions from CGT are available for gifts to the Republic or to a local authority for educational or other charitable purposes or to approved charitable institutions.
The full value of donations to a public-benefit Foundation by individual or corporate donors is tax deductible, with no limits. There are no restrictions on the ability of a Cypriot Foundation to receive donations from overseas.
Dissolving a Foundation
A Foundation ceases to exist in the cases defined by its founding charter. It is dissolved by decision of the competent court at the request of the board of directors or the Registrar if its purpose has been fulfilled or has become unattainable, due to inactivity for a period exceeding two years, or if it has deviated from its purpose or if its purpose or function has been unlawful.
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