New Zealand comprises of two islands, it is very much a part of the ‘onshore’ world. As a respected OECD and FATF member, it is in the unique position of being a reputable onshore jurisdiction, whilst also offering various tax efficient vehicles, which are increasingly utilised for international tax planning.
The challenges faced by traditional offshore jurisdictions, combined with New Zealand’s tax laws and international reputation have made it a very attractive low-tax jurisdiction.
Tradition Of Trusts
New Zealand has a long tradition of trusts similar to recognised trust jurisdictions such as the United Kingdom and Canada.
The main statute is the Trustee Act 1956. Its provisions relate primarily to the administration of trusts and their supervision by the courts. The structure and wording of the Trustee Act 1956 are based closely on England’s 1925 Trustee Act. Trust legislation is currently under review in New Zealand and in September 2013, the NZ Law Commission released its ‘Report on the Review of the Law of Trusts’ in which it recommended the introduction of a modern and comprehensive Trust Act. If approved and enacted, the new Trust legislation will reform the New Zealand Law of Trusts in a number of key areas.
Benefits Of New Zealand Trusts
The potential benefits of a New Zealand Trust include the following;
- Asset protection;
- Succession planning;
- Onshore, non black-listed jurisdiction; and
- Limited reporting requirements.
Furthermore, a New Zealand Trust which is settled by a non resident settlor, for non resident beneficiaries, is not subject to New Zealand tax except on income derived in New Zealand. This is the case even if the trustee is a tax resident of New Zealand.
There are no inheritance, wealth or capital gains taxes levied in New Zealand. There is no gift duty, stamp duty, VAT or equivalent forms of indirect taxation charged on the creation, or transfer of assets to a trust, by a non resident of New Zealand.
In order to avail of optimum tax benefits, a New Zealand resident trustee referred to as a 'resident foreign trustee’ must be appointed. The resident foreign trustee is typically a New Zealand corporate trustee. Foreign-sourced income derived by a New Zealand resident trustee is exempt from income tax in New Zealand provided the settlor is not resident in New Zealand.
Disclosure Upon Settlement
A trustee of a foreign trust must provide the NZ Inland Revenue Department within 30 days of settlement of the trust, with;
- The name of the New Zealand Trust and date of settlement;
- The name and address of the Trustee; and
- Whether a Settlor is resident in the Commonwealth of Australia.
However, this information is not available to the public and there is no public registry of trusts.
Choose New Zealand
All of the above factors, combined with New Zealand’s favourable tax and trust laws, makes New Zealand a beneficial jurisdiction for establishing offshore trusts.