We have been expecting changes to the treatment of Foreign Trusts in New Zealand since the publication of the so-called “Panama Papers” in April of 2016.
It has taken a long time but the New Zealand government has finally produced the new forms and procedures for New Zealand Foreign trusts (defined as trusts settled by settlors and holding assets outside New Zealand). The main points are:
The new legislation was passed in February this year and was effective as at 21st February. [From this point the previous disclosure rules no longer apply].
When we are creating a New NZ foreign trust we must register it with the New Zealand Inland Revenue Department and not merely disclose its existence.
Existing Foreign Trusts have until 30 June 2017 to register with the New Zealand Inland Revenue.
At registration, we must provide the IRD with a copy of the trust instrument (trust deed or declaration of trust issued by trustee) and full details of all people involved (settlors, trustees, beneficiaries (if any), protectors (if any) and all other controllers (a new concept replacing Beneficial Owners). The information required includes the TIN (Tax Identification Number) in their country of residence. All this information will be made available to some New Zealand government departments and to tax authorities in countries with which New Zealand has entered into an Automatic Exchange of Information Agreement. The information will not be kept in a public registry. All this information must be kept up to date.
New Zealand foreign trusts must file annual accounts with the IRD.
If the above criteria are met, then New Zealand Foreign trusts will continue to be tax exempt on their income earned and kept outside New Zealand.
Some of the previous benefits of NZ Foreign trusts (confidentiality and privacy) are no longer available to our international clients. New Zealand is still an attractive jurisdiction as international income will still be tax exempt.
We generally use discretionary trusts where any disclosure would only be required when payments are made into or out of the trust.
The use of underlying companies to hold the investments, means actual disclosure will anyway be minimal.
These days using off-shore structures may invite further investigation. However New Zealand with its new regime and as an OECD member, will not be subject to such scrutiny.
We ask that you gather the required information, as detailed above, to start the process of registering the Trusts we administer for you. We would appreciate your cooperation with this so that we can complete the process as quickly as possible.
The new regulations should not be a problem to you. For those who consider the new rules unwanted, we can offer some alternatives by moving their assets to another jurisdiction and/or structure.