Reasons For Increase In New Zealand’s Number Of Foreign Trust

Geoffrey Cone is a partner at Cone Marshall. He holds a Bachelor of Laws degree from the University of Otago. Cone also has a post graduate diploma in tax and trust law. He began his career in 1980. In 1999, Cone established his practice, the Cone Marshall Limited.

The Organization for Economic Cooperation and Development does not list New Zealand as a tax haven. As a matter of fact, the country has never featured on the list. Tax havens are countries whose economic systems impose little or no nominal taxes, lack transparency, and their laws prohibit the exchange of information with other regimes. Moreover, New Zealand does not house a highly secretive banking industry.

New Zealand was among the first nations to adopt the Tax Information Exchange Agreements that was proposed by the OECD. The island country has demonstrated its leadership in handling tax-related matters with the highest level of transparency by the way it handles foreign trusts. Michael Cullen introduced new rules in the taxation policy in 2006. He had done extensive consultation and research into the subject matter. The new law requires that a New Zealand citizen trustee of a foreign trust must fill out a Foreign Trust Disclosure form (IR607). The new rule also makes it mandatory for the New Zealand resident trustee to keep their financial records for New Zealand tax purposes.

The Inland Revenue Department states that financial records must include the details of distributions and settlements, trust deeds, particulars of the trustee’s assets and liabilities, and the trustee’s transactions. The new rule further requires that all documents must be kept in New Zealand and recorded in English. The implementation of the world standard money laundering legislation led to the acquisition of new powers by the Inland Revenue Department.

Many countries require that a person settling a trust must report the settlement of funds to the relevant revenue authority. Therefore, the tax authority will have sufficient information to request the details of a certain transaction. New Zealand has 39 double tax agreements that enable it to reduce tax barriers that might be incurred in transactions that cross national borders. Moreover, the tax agreements aid in the prevention of fraud and tax avoidance. Recently, New Zealand signed up to a multilateral Convention on Mutual Administrative Assistance in Tax Matters. These features of the New Zealand’s taxation system show clearly that the country is not a tax haven.

The main reason for the increase in the number of foreign trusts managed in New Zealand is because the country is economically stable. Besides, New Zealand has a well-structured judicial system, high-quality jurisdiction, and a good legal and professional structure.