New Zealand Trading Trusts
In addition to its use for private client wealth preservation the New Zealand foreign trust can also be used as a tax effective vehicle for international trading and commercial activities.
A trading trust is a trust where the trustee uses the trust property to conduct a business or commercial enterprise. The law assumes that the trust does not trade as it is not in itself a legal entity - it is the trustee who is conducting the trading activities.
The profits derived from those trading activities accrue as income of the trust and, subject to the provisions of the trust deed, are available for distribution to the beneficiaries of the trust. The trustee has no right personally to the profits derived from the trading activities, as the income has been derived from the use of trust property.
A New Zealand foreign trust that operates as a trading trust is of course only liable to New Zealand income tax on income derived from a source in New Zealand. Consequently care needs to be taken to ensure that the income arising from the international trading activities is not considered to be New Zealand sourced income.
Click on one of the links below to read more about New Zealand trusts: