January 2017

NZ Trusts

A New Zealand Foreign Trust is an entity which provides non-resident persons an opportunity to utilise the economic and political stability and trusted reputation of New Zealand as a base to manage their assets, without the imposition of New Zealand tax on non-New Zealand sourced income.

The benefits of a NZ Foreign Trust or Foreign Trust are a matter of preference and strategic tax planning on the part of those who may be the beneficiaries of the Trust

New Zealand views A Foreign Trust as a "trust with a foreign settlor". These Foreign trusts must have a New Zealand-resident trustees and as a result are exempt from tax on foreign-sourced income.

To qualify for the exemption for tax on foreign-sourced income, resident trustees of a foreign trust will have to be compliant with the disclosure requirements for registration, and will also need to fulfil their annual filing obligation.

Registration and annual filing fee

The proposed amendments to be implemented soon include a registration fee of $270 and an annual filing fee of $50. The bill also proposes a regulation-making power which will allow the registration and annual filing fees to be amended by Order in Council.

There is currently no formal registration process for foreign trusts. However, the Tax Administration Act 1994 requires foreign trusts with a New Zealand-resident trustee to disclose certain information to the Commissioner of Inland Revenue upon establishment. The information required to be disclosed upon establishment is

• The name or identifying particulars of the foreign trust,
• The name of a New Zealand trustee
• Whether there is an Australian settlor

Key features

Resident trustees required to register foreign trust

Resident trustees of a foreign trust will be required to apply for registration of the trust. As part of the registration, the resident trustee must provide certain information relating to the foreign trust to the Commissioner, including information relating to settlors and beneficiaries and the trust deed.

Foreign trusts formed after the date of enactment will need to register with Inland Revenue within 30 days. Existing foreign trusts will have to register by 30 June 2017.

Annual returns

Resident trustees of a foreign trust will be required to file annual returns, information in the annual return includes:

• The trust’s financial statements and
• Details of settlements and distributions, made over the year.
• Any changes made to the information that is provided as part of the initial disclosure on registration.

The resident trustee will be required to file annual returns for every year that the trust is registered. The due date for annual returns corresponds to the foreign trust’s balance date, with the annual returns due three months after the trust’s balance date. If the trust does not have a balance date because it does not prepare financial statements, the return is due 30 June following the end of the tax year.

Information sharing with other agencies

Inland Revenue shares information about foreign trusts with overseas tax authorities in countries with whom New Zealand has an agreement which includes information sharing provisions. This information is shared when requested by the overseas tax authority or proactively in instances where Inland Revenue considers that the information may be of interest to that tax authority.

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