A New Zealand foreign trust offers unique tax advantages and can be used for asset protection, wealth management and succession planning. New Zealand has a well-deserved reputation for openness, transparency and good governance, as well as protective privacy laws which preserve the confidentiality of trust settlors and beneficiaries. New Zealand foreign trusts are a valuable alternative for clients who are constrained from using Cook Islands or Nevis products.
About New Zealand
New Zealand is a country in the southwestern Pacific Ocean consisting of 2 main islands, both marked by volcanoes and glaciation. Capital Wellington, on the North Island, is home to Te Papa Tongarewa, the expansive national museum. Wellington’s dramatic Mt. Victoria, along with the South Island’s Fiordland and Southern Lakes, stood in for mythical Middle Earth in Peter Jackson’s “Lord of the Rings” films.
Advantages of New Zealand
• New Zealand is recognised as one of the least corrupt countries in the world, ranking behind Denmark, Finland and Sweden. It is an active member of a number world organisations such as the OECD, WTO, World Bank, UN and FATF. The country is therefore considered a reliable and safe country for a HNWI wanting to establish a New Zealand foreign trust as part of their wealth planning.
System of Government
• New Zealand’s Head of State is the Sovereign, Queen Elizabeth II. The Governor General is the Queen’s Representative who carries out formal constitutional functions. The Executive, Legislature and Judicial branches of the Government are separate and independent from each other, and is based on the Westminster model and is a self-governing member of the Commonwealth. New Zealand is a politically stable country with the rule of law being paramount. It is a common law country whereby the Judiciary interprets the law through the courts, and because of its remoteness and independence, it is less influenced by the decisions of the EU and/or other countries
• New Zealand imposes no capital gains tax (in limited circumstances), wealth tax, inheritance tax, or stamp duty. Its residents are subject to tax on worldwide income and double tax treaties apply where applicable.
• New Zealand is not perceived as a harmful tax jurisdiction by the OECD, nor a preferential tax regime or tax haven by other countries, but at the same time it offers a favourable tax position for its New Zealand foreign trusts.
• Unlike other jurisdictions, New Zealand foreign trusts are taxed by residence of the settlor rather than through the residency of the trustee. Therefore this means that so long as the settlor and assets of the trust are located outside of New Zealand, the trust will not be subject to New Zealand tax. The trust will only be subject to tax in the country within which the assets are based, or when capital or income distributions are made to a beneficiary where they reside and/or are domiciled. With zero tax liability in New Zealand, this ensures that the trust or beneficiaries are not taxed twice.
• New Zealand’s tax authority, the Inland Revenue Department (IRD), holds information on all New Zealand foreign trusts however this information is not publically available. Where a tax treaty partner makes a request for information, the IRD will not entertain general ‘fishing expeditions’ on information about a trust unless there is just cause.
• In order to ensure that New Zealand foreign trusts are not subject to tax on worldwide income, at least one trustee must be a Qualifying Trustee. This means that the directors of the corporate trustee must be registered either with the New Zealand Law Society, Institute of Chartered Accountants or the Society of Trust and Estate Practitioners (New Zealand Branch). This ensures that anyone offering trustee services in New Zealand are technically competent and of high professional calibre.
• New Zealand is an economically safe and stable country. It became a member of the OECD in 1973 along with 34 other member countries. As a member, it has adopted a number of policies and practices recommended by this intergovernmental organisation.
Uses of a New Zealand Trust
• The settlor may envisage a different purpose for his/her wealth that cannot be provided for in their home country or in other jurisdictions. Trusts can be used as an independent and safe vehicle for wealth planning.
• Placing the ownership of assets outside the home country of the settlor, ensures that the assets are safe from unforeseen circumstances such as an unstable government and/or risk of confiscation of assets, kidnapping or extortion, or potential settlor liability. A foreign judgment will only be recognised if that jurisdiction has a reciprocal agreement with New Zealand, and it has obtained registration of the foreign judgment from a New Zealand Court which will involve issuing court proceedings in New Zealand.
• Assets held within the trust can preserve inter generational wealth ensuring continuity of ownership after the settlor’s death.
• A trust will ensure that there is a plan in place for vulnerable members of the settlor’s family.
• A New Zealand foreign trust allows the settlor to avoid forced heirship in their home country. A trust gives a person the freedom to dispose their assets in accordance with their own wishes that may differ to foreign heirship rules governing the settlor.
• The assets held in the trust will not be subject to probate laws or inheritance tax after the settlor’s death.