What is a Trust?

In Common Law, a trust is an arrangement entered into by a Settlor and a Trustee, whereby the assets of a first party (Settlor) are transferred into the care of a second party (Trustee), and any subsequent benefits derived from the assets are the transferred to a third party (Beneficiary).

What is a New Zealand Foreign Trust?

The New Zealand Foreign Trust is a legal arrangement governed by New Zealand legislation, entered into by a non-resident Settlor and a New Zealand resident Trustee for the benefit of a non-resident Beneficiary, specified by the Settlor. There can be any number of Settlors and Beneficiaries, all who must be non-residents of New Zealand. There can be any number of Trusties and at least one of them must be a resident of New Zealand (private or corporate).

What are the Benefits of a New Zealand Foreign Trust?

A) Wealth and asset protection.

Trusts have a long tradition in the everyday life of countries where Common Law is applied. However, in the changing pattern of the present day business world, there is an increasing number of situations where assets could not be effectively kept from creditors in domestic established trusts. Debit securities, mutual funds, etc. could ideally be held by a foreign trust. Taking into consideration the clean reputation of New Zealand itself, New Zealand foreign trusts could be one of the most optimal solutions.

B) Zero taxed international business vehicle

In accordance with New Zealand legislation, in particular the Income Tax Act, foreign sourced income derived by a New Zealand Foreign Trust is an exempt income (non-taxable, zero taxed) for New Zealand tax purposes. However, in the case where a New Zealand Foreign trusts has income from New Zealand sources, it is considered to be taxable.

What is the taxation situation for a New Zealand Foreign Trust in the case of New Zealand sourced income?

In the case where a New Zealand Foreign Trust has income from New Zealand sources, it is considered to be taxable in New Zealand. In most cases, it is strongly recommended for the purposes of tax planning to use a New Zealand Foreign Trust just for international business activity outside New Zealand.

What kind of activity can a New Zealand Foreign Trust carry out?

The New Zealand Foreign Trust is a standard vehicle for business and investment activity. As such, it can carry out any kind of international trade, import export operations, the buying and selling of real estate, filing court actions etc.

How practically can I use New Zealand Foreign Trusts?

As mentioned earlier, the New Zealand Foreign Trust could be used in any business or investment structure as a sole vehicle. Additionally, a specifically registered trustee company can trade in the name of the Trust with(out) trust disclosure. In this case, all income received by Trading Trustee company from non-New Zealand sources for the purposes of carrying out business activity for the Trust is excluded from New Zealand taxation. Clearly, this is one of the unique ways of having your limited liability company registered in a developed Western country with 0% tax. Taking into consideration the cost of running such structure and costs of administration, this is a healthy alternative to all so-called offshore companies.

Is the income distributed to Beneficiaries of a New Zealand Foreign Trust taxable in their hands in New Zealand?

No, if the income is derived from non-New Zealand sources. Conversely, the income derived from New Zealand sources is subject for New Zealand taxation. In most cases, it is strongly recommended for the purposes of tax planning to use a New Zealand Foreign Trusts just for international business activity outside New Zealand.

Does the New Zealand Foreign Trust comply with double taxation regulations?

New Zealand, a developed country of the modern world, has 35 double taxations agreements. As a standard business vehicle, any New Zealand Trust can utilize most of New Zealand double taxation treaties.

Does the New Zealand Foreign Trust provide adequate levels of confidentiality to its parties?

Yes, New Zealand law does not require a New Zealand established Trust to be registered with Government bodies. The only official disclosure required to be made by a New Zealand Foreign Trust is limited information to the New Zealand Inland Revenue Department in regards to the date of establishment, name of the trust, and the Trustee name and address. The names of Beneficiaries and Settlor are not required to be disclosed to any government bodies (with the exception of the internationally recognized practice of court orders).

Is the New Zealand Foreign Trust recognized by international law?

New Zealand Foreign Trusts are recognized by the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition. Generally, any foreign trust is recognized by countries of Common law, and recently some countries of Civil Law i.e. Italy, and Switzerland.

Can a New Zealand resident be a Settlor or Beneficiary of a New Zealand Foreign Trust?

No, as standard rule, the Settlor and Beneficiary of a New Zealand Foreign Trust must not be a New Zealand resident, but at the same time the Trustee of a New Zealand Foreign Trust must be a New Zealand resident.

Is the use of a New Zealand Foreign Trust considered to be tax avoidance?

No, if the New Zealand Foreign Trust is established for genuine business reasons and purposes, and not for the sole purpose of attaining a zero taxed regime, then it could not be qualified as anything remotely resembling tax avoidance.

Could I register my own Trustee company?

We are happy to provide you with Trustee service and Trust administration. But, yes, you can also register your own Trustee company. This type of Trustee company by law is required to be a New Zealand resident for the purpose of Income Tax Act 2007 and Tax Administration Act 1994. We are happy to provide you with company registration service and non-executive directorship services.

Is a physical presence required by the client in New Zealand?

No, in the New Zealand legal system, any documentation required for the formation of a New Zealand Foreign Trust can be submitted via email or fax. Further, there is no set requirement for meetings of shareholders or directors to be held in New Zealand.

Is it necessary to establish a New Zealand bank account?

No, while New Zealand posses a developed banking system on par with other OECD nations, there is no legal requirement for a bank account to be opened in New Zealand.