Main amendments to New Zealand’s Foreign Trusts

The Bill submitted on August 2016 proposed several amendments to New Zealand’s Foreign Trust regime, among the most relevant are the following:

1 Foreign Trusts Registration:

Information requested through the IR 607 Form will be broadened according to information indicated below.

This information must be disclosed by all Trusts created after the approval of this legislation, while the existing Trusts must comply with the disclosure before June 30, 2017.

2 Foreign Trusts’ Information to be disclosed:

Information required in form IR 607 for Trusts will be the following:

Name, email address, foreign residential address, country of tax residence and tax identification number of:

  • the settlor or settlors
  • the protector
  • non-resident trustees
  • any other natural person who has effective control of the trust
  • beneficiaries

For the so called Discretionary Trusts (those trusts where the beneficiaries are not determined, but certain criteria is set for their determination) disclosure must be made on any real beneficiary that is not in the document and describe with enough detail each class of beneficiary that must be identified and the criteria for their determination upon the distribution of the estate fund.

Likewise, the trust deed must be registered.

3 Sanction in case of non compliance:

In case of non compliance, the sanction will be the exemption of the Trust from the tax benefits, although these may be recovered provided there was no intention and the mistake is remedied immediately. It is not clear what the term immediately stands for.

Currently, the qualifying resident foreign trustees have a safe harbor according to which they are subject to minor sanctions in case certain norms are not complied with. The draft bill includes the elimination of the referred benefit.

4 Inland Revenue Annual Reports:

An annual return must be made to the IRD that includes any change in the information provided to the registry, annual financial statements of the Trust, the amount of any issued distribution and the name, tax identification number and country of tax residence of the beneficiary. In case new contributions are made by another settlor, all his or her information must be provided.

5 Annual fee and registration fee of the Trust:

A registration fee of NZ$ 270 and an annual fee of NZ$ 50 will be implemented. These costs may be modified in the future.

6 Information Exchange between New Zealand governmental agencies:

The Inland Revenue (fiscal entity) will administer the registry, which may be consulted by the Department of Internal Affairs and the Police, although the government expects other agencies with action power in this matter may have access thereto.

Despite these modifications, the fiscal benefits that the Foreign Trusts have in New Zealand will remain the same.

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