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New Zealand Foreign Trusts: New Financial Reporting Standards

New Zealand Foreign Trusts_ New Financial Reporting Standards.jpg
New Zealand Foreign Trusts_ New Financial Reporting Standards.jpg

New Zealand Foreign Trusts must now prepare financial statements in accordance with the applicable minimum requirements prescribed by the New Zealand Government in the Tax Administration (Financial Statements – Foreign Trusts) Order 2017.In today's blog post we review these new requirements.

New Zealand Foreign Trusts

New Zealand taxes trusts on the basis of the tax residence of the settlor. Accordingly, there is an exemption available in the Income Tax Act 2007 for foreign-sourced amounts derived by resident trustees.

In order to qualify for the exemption, resident trustees must comply with disclosure requirements. These requirements include the filing of an annual return. The annual return must include the trust’s financial statements, and details of settlements and distributions made over the year.

As of 1 January 2018, trustees must file a part-year annual return including financial statements when a trust closes. The annual return and financial statements must be filed within two months of the closure. 

Related: New Disclosure Rules for New Zealand Foreign Trusts

Minimum Requirements For Financial Statements 

An Order in Council was made to specify the minimum standards for financial statements for foreign trusts.  The Order clarifies what information must be contained in financial statements

The minimum requirements for financial statements of a foreign trust as set out in the Act are as follows:

Form of Financial Statements

Financial statements must consist of:

(i) balance sheet setting out the assets, liabilities, and net assets of the trust as at the end of the return year; and

(ii) profit and loss statement showing income derived, and expenditure incurred, by the trust during the return year; and


Financial statements must be prepared applying the principles of accrual accounting; and 


Financial statements may, however, disclose amounts using the following valuation principles:

(i) tax values, when those values are consistent with double-entry and accrual accounting; and

(ii) historical cost with impairment or depreciation as appropriate; and

(iii) market values, when, in the preparer’s opinion, market values provide a better basis of valuation than those in subparagraphs (i) and (ii); and

Related: New Zealand Foreign Trusts [whitepaper]

Statement Of Accounting Policies

Financial statements must contain a statement of accounting policies setting out, in sufficient detail so that a user can understand the material policies that have been applied or changed:

(i) the policies and assumptions that have been used in the preparation of the financial statements; and

(ii) a description of the effect of any material changes in the accounting policies used since the previous year for which financial statements were prepared; and

Matters That Statements Must Show

Financial statements must:

(i) disclose comparable figures for the previous return year (if financial statements were prepared for that previous year); and

(ii) include a statement of taxable income (if any) in New Zealand dollars for the return year; and

(iii) include a reconciliation of movements, on a line by line basis, from opening to closing balance, of:

(a) all settlor and beneficiary accounts, including loans; and

(b) net assets; and


Financial statements may be prepared in any appropritate currency.

Related: 6 Main Duties of a Trustee

Specialised Trust Accounting Services

It is crucial that trustees of New Zealand Foreign Trusts prepare financial statements to the minimum requirements in order to comply with their ongoing disclosure requirements.

Pearse Trust is ideally placed to provide professional trust accounting services to trustees for whom this financial reporting represents an additional burden which they need to outsource.

New Zealand Trusts whitepaper

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