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Latest Developments
Legislation changes to New Zealand Foreign
Trusts
Applicable from 1st October 2006
Background
A New Zealand Foreign Trust is modelled on the English style of
trust, which requires an offshore resident settlor (for example
your client or their representative) with your own or your client's
New Zealand company, which we register to act as a corporate trustee.
All income sourced offshore through this company (acting as sole
trustee on behalf of the trust) is totally tax free, and there are
no capital gains, inheritance taxes or forced heirship. Any income
earned within New Zealand (example interest from a bank account)
is subject to domestic tax. The income, at your client's discretion
can either be retained in the trust, or alternatively distributed
to your client's named beneficiaries.
New Legislation
The new legislation recently passed, will require from 1st October
2006, either a New Zealand resident unqualified director, or a professional
"qualifying" (chartered accountant or lawyer), as either a manager,
or a director of a trustee company for a N.Z. Foreign Trust. If
the former (unqualified director) is utilized, then should there
be any omissions including any non compliance with the new legislation
by the corporate trustee, then, until the omission is rectified,
the trust will be taxable on its world wide income. If this liability
arises, and if subsequently a trustee does provide the outstanding
records, the liability for tax on worldwide income will cease retrospectively.
The fee for us providing a NZ resident unqualified director providing
these outcomes will depend on the level of responsibility, complexity
and time commitment.
The other option is to select as the N.Z. resident manager, or as
a director, "a qualifying N.Z. resident trustee" being a professional
(chartered accountant or lawyer), being the "safe harbour", which
will result in the trust NOT being at risk of taxation on its World
wide income in the event of any omissions or non compliance. Instead
the matter would be dealt with by the disciplinary committee of
the professional's Accountants or Law Society, and punishment for
this "qualifying" person will be a fine and or imprisonment. The
fee will depend on the level of responsibility, complexity and time
commitment. Our company can provide the necessary individuals. For
corporate trustees operating for more than one N.Z. Foreign Trust,
we negotiate a fee per additional trust.
Under the new legislation, it will be necessary for our firm to
advise our Revenue of the existence of a New Zealand Foreign Trust,
its date of settlement, and identify the trust by our designated
code. No other information is required (except in the situation
where the settlor is an Australian resident, where that fact has
to be disclosed). There will be additional minimum records to be
held in N.Z. by the N.Z. manager or director, such as a copy of
the trust deed, details of receipts and payments, trust financial
accounts, plus details of distributions to beneficiaries. This information
is not provided to our Revenue, but would have to be disclosed only
following a specific request from an offshore Government with whom
New Zealand has a double tax treaty, under the sharing of information
agreements by these Treaty countries. These provisions result from
the Australian Tax Office requests to the N.Z. Government and are
to primarily target Australian resident settlors. For practical
purposes there is little expectation of active information exchange
in respect of individuals resident in jurisdictions other than Australia.
Advantages of New Zealand
New Zealand is recognized as a premium jurisdiction for the following
reasons: It provides the all advantages of traditional "offshore"
financial centres, but is recognized as a true "onshore" financial
centre which is NOT blacklisted by any jurisdiction or authority
in the world. It is not perceived by O.E.C.D. as a harmful tax jurisdiction,
and has no connotations as a tax haven.
It is a member of the O.E.C.D. and World Trade Organization. New
Zealand is a member of the British Commonwealth, English is the
main language, has a common law system, and the majority of legislation
including trust law is founded on British law.
It is not a member of the EU, and is not influenced by the EU Savings
Tax Directive and any future developments (should they be extended
to apply to companies or trusts). It is a signatory to the 1922
Hague Convention and can provide Apostilled documentation as well
as Notarised documentation.
In today's troubled and unstable times New Zealand is considered
a safe location and offers long term security. It has a Westminster
style Government and together with its administration, is stable
and competent.
New Zealand has a well developed infrastructure, including a progressive
and robust economy, efficient telephone and internet services, competitive
and frequent air travel, experienced reliable professionals serving
global clients with trust and company requirements which include
legal opinions on tax, trust and company matters, and has reliable
internet global banking services.
NZ Securities Limited
NZ Securities was commenced and is managed by Garth Melville who
qualified as a Chartered Accountant in 1970 and was admitted to
STEP three years ago. He and his staff have had many years experience
in international commerce, tax, trust and company matters. The firm
has established trust clients in UK, Ireland, Western Europe, Eastern
Europe, Malta, Cyprus, the Americas, Asia, as well as many other
jurisdictions. We assist with advice, structuring, and maintaining
on an ongoing basis on behalf of other intermediary firms. Your
original clients remain your clients, and our contractual relationship
is with you.
Fees
Our fees will depend on your exact requirements and specifications
as well as volume of business.
Conclusion
These changes should generally be positive, as the level of compliance
or disclosure is not onerous, but the recognition, confirmation,
and support by our Government of the N.Z. Foreign Trust industry
is very encouraging. We welcome inquiries and will be happy to provide
more in depth information, including legislation references.
Kind regards
Garth Melville C.A. TEP
Chartered Accountant & Managing Director
NZ Securities Limited
For further information please contact us here
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