Trusts / Asset Planning

Beware: Disclosure Rules for Foreign Trusts Have Tightened

In February 2017 the New Zealand Parliament completed its third reading of the Taxation (Business Tax, Exchange of Information and Remedial Matters) Bill which is due to come into law soon. The Bill introduces new laws for the administration of New Zealand foreign trusts.  The reforms are based on the recommendations of the Shewan Inquiry which was set up as a result of the Mossack Fonseca data leak in April 2016 (the ‘Panama Papers’).  The report raised concerns about the need for disclosure rules relating to foreign trusts registered around the world.  The New Zealand Government has decided to enact the new law to ensure New Zealand's reputation is maintained. 

The new law will enable New Zealand's participation in the G20/OECD Common Reporting Standard for the Automatic International Exchange of Financial Account Information. 

In particular, the new law will require foreign trusts to be registered with the Inland Revenue Department (IRD).  Registration will cost NZ$270 and foreign trusts will be charged an annual administration fee of NZ$50. Trustees will need to supply the following information to the IRD:

  • name of the trust;
  • a copy of the trust deed; and/or amendments or additions to it; 
  • details of each trust settlement;
  • full details of the settlor(s) or controller of the Trust;
  • details of all adult beneficiaries, and parents or guardians of minor beneficiaries of fixed trusts; and
  • details of each beneficiary or class of beneficiary of a discretionary trust.

Trustees will have to register their foreign trust with the IRD by 30 June 2017 and, going forward, must notify the IRD of any changes within 30 days of becoming aware of the change.  All foreign trusts must file the first return by 30 June 2018.

A foreign trust with a trustee resident in New Zealand will lose its tax exemption unless the trustee has registered the trust and fulfilled the associated disclosure obligations at that time. However, the exemption would still be available if the non-registration or non-disclosure was unintentional, and, was remedied immediately.

The IRD may share information held about foreign trusts with members of the New Zealand Police and an officer, employee or agent of the Department of Internal Affairs, who may use this information for regulatory and law enforcement purposes. 

New Zealand ranks first alongside Denmark as the least corrupt of 176 countries listed in the Corruption Perceptions Index 2016. This ranking is based on international research compiled by the Berlin-based anti-corruption organisation, Transparency International, which draws on numerous surveys covering expert assessments and views of businesspeople.

It is important that trustees of foreign trusts comply with the new rules outlined above in keeping with New Zealand’s reputation as a leader in this area.  Brookfields Lawyers is able to assist you in these new reporting requirements to ensure proper compliance. 

For more information or assistance please contact:

Alison Gilbert
Partner
Tel: +64 9 379 9350
DDI: +64 9 979 2253
Email: 

Samuel Ames
Senior Solicitor
Tel: +64 9 379 9350
DDI: +64 9 979 2183
Email: 

Polina Kozlova
Law Clerk
Tel: +64 9 379 9350
DDI: +64 9 979 2223
Email: 

DISCLAIMER

This information is intended to be general in nature.  You are strongly recommended to seek your own legal advice in relation to the matters dealt with here.

© Brookfields Lawyers 2017 – All Rights Reserved

 

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