The New Zealand government has recently passed law changes to tighten its foreign trust rules. The new rules will require all New Zealand Foreign Trusts to be formally registered with the New Zealand Inland Revenue Department and to disclose information on all settlements and distributions including copies of trust deeds. Information will also need to be provided on Settlors and certain Protectors and beneficiaries. The rules apply from the date of Royal Assent of the legislation for any new trusts (21 February 2017), and from 30 June 2017 for any existing trusts.
The trust must be registered with the New Zealand Inland Revenue Department within 30 days of establishment (or by 30 June 2017 for existing trusts). The registration requirements include the following:
- Payment of the prescribed registration fee – currently set at NZ $270
- Name of the trust
- The date and detail of each settlement on the trust
- The name, email address, residential address or business address, jurisdiction of tax residence, and taxpayer identification number of:
- Each settlor
- Each person with a power (or power to control the exercise of such power) to appoint or dismiss a trustee, to amend the trust deed, or to add or remove a beneficiary;
- Each person with a power to control a trustee in the administration of the trust;
- Each trustee;
- For a fixed trust, each beneficiary or nominee for an underlying beneficiary (including parent or guardian in respect of minor beneficiaries).
- For a discretionary trust, details of each beneficiary or class of beneficiary
- A copy of the Trust Deed and any amending documents
- A declaration from the Trustee that the persons specified in 4(a)-(d) above have all been advised of, and have agreed to provide the information necessary for compliance with the requirements relating to the provision of information imposed by:
- The Tax Administration Act 1994;
- The Anti-Money Laundering and Countering Financing of Terrorism Act 2009;
- The regulations made under the Anti-Money Laundering and Countering of Financing of Terrorism Act 2009
The trust must also comply with annual requirements for each return year (within 6 months of the end of the return year). A return year is the year ending on either the date on which financial statements are prepared, or if no financial statements are prepared or required to be prepared, then 31 March. The annual requirements include:
- Payment of the prescribed annual fee – currently set at NZ $50
- Notification of any changes made to any of the information provided on registration
- Provision of financial statements if the trustee prepares financial statements, or is required to prepare financial statements
- Provision of date, amount and nature of each settlement made on the trust in the year, including information (as outlined in (4) of Registration Requirements above) on the settlor
- Provision of date and amount and nature of each distribution made during the year including information (as outlined in (4) of Registration Requirements above) on the beneficiary receiving the distribution (or parent or guardian if the beneficiary is a minor)
It is noted that there is currently no requirement for New Zealand Foreign Trusts to prepare financial accounts. However, there are requirements for the Trustee to essentially hold sufficient financial information to allow for the preparation of financial accounts.
Implications for failure to comply
If a New Zealand foreign trust does not register with the New Zealand Inland Revenue, and/or does not fulfil its associated annual disclosure obligations, then the trust will lose its exemption from New Zealand tax on foreign sourced income. This will result in the trust becoming taxable in New Zealand on its worldwide income.
Please note, the Register that is established under this legislation will not be publicly available. The Register will be maintained by the New Zealand Inland Revenue Department, but the information will be able to be made available to the Department of Internal Affairs and to the New Zealand Police for law enforcement purposes. In the face of these increased disclosure requirements, it is important to reflect on the fact that New Zealand Government departments are highly reputable and secure. New Zealand consistently ranks among the least corrupt nations in the world – often topping the table on Transparency International’s corruption perceptions index, which ranks countries by perceived corruption levels among public officials and politicians. In 2016, New Zealand once again ranked number one on this list.
If you or your clients have existing New Zealand Foreign Trusts, your Asiaciti Trust representative should be in touch shortly to request any additional information that may be required in order to ensure registration of the trust prior to 30 June 2017. If you do not hear from them shortly, please contact your Asiaciti Trust representative directly.