Overview of a New Zealand Offshore Foreign Trust (NZFT)
A New Zealand Foreign Trust (NZFT) also known as a New Zealand (NZ) Offshore Trust or NZ Non-Resident Trusts has existed since 1988 with legislation going back to the Trustee Act of 1956. Since then, the jurisdiction has formed over eight thousands trusts, providing clients with a number of advantages not normally found within the offshore sector.
Because NZ is a traditional high-tax structured jurisdiction it does not carry with it a stigma normally associated with other offshore 'tax havens', providing many of the advantages in a traditional offshore financial centre, but without the undue scrutiny of foreign governments and financial regulatory agencies.
A NZFT is a legal entity established and owned by a settlor—a non-resident of NZ whose assets are held and under management of a NZ resident trustee. The NZ resident trustee manages the assets in accordance with the details outlined in the trust deed, under the instructions of the settlor for the benefit of an intended beneficiary.
A NZFT has any number of arrangements and applications, as NZ legislation has given foreign trusts the ability to create a flexible management structure and conduct business in virtually any offshore or onshore sectors.
Successive NZ government administrations have supported their foreign trusts, which have been used as a means of attracting international investors, maintaining that their trusts are legitimate wealth management vehicles and lay well within the confines of the international regulatory standards.
A properly structured NZFT is a unique asset protection and business management investment vehicle that offers a number of benefits to foreign investors seeking confidentiality, low-level information disclosure and offshore security.
Key Corporate Features of a New Zealand Foreign Trust
|New Zealand Foreign Trust||Corporate Details|
|Type of Entity||Foreign Trust|
|Type of Law||English Common Law with New Zealand statutes|
|Governed by||New Zealand Trustee Act 1956|
|Registered Office in New Zealand||Yes|
|Shelf company availability||Yes|
|Our time to establish a new company||2 weeks|
|Minimum government fees (excluding taxation)||NZD 50.00|
|Access to Double Taxation Treaties||Yes|
|Parties to the Trust|
|Minimum number||Two (A settlor and a NZ resident trustee)|
|Local required||Yes (NZ trustee)|
|Publicly accessible records||No|
|Corporate directorship allowed||Yes|
|Requirements to prepare||Yes|
|Requirements to file accounts||No|
|Publicly accessible accounts||No|
|Recurring Government Costs|
|Minimum Annual Tax / License Fee||NZD 50.00|
|Annual Return Filing Fee||NA|
|Requirement to file annual return||No
Advantages of a New Zealand Offshore Foreign Trust
- New Zealand provides all the advantages of traditional offshore financial centres, but remains primarily recognized as a mainstream onshore financial centre
- New Zealand is not a member of the EU and not influenced by the EU Savings Tax Directive
- A properly structured NZFT is eligible to enjoy 0% tax in NZ on all of its non-NZ sourced incomes
- New Zealand Foreign Trusts are not restricted in any type of business activities
- New Zealand is not perceived as being a 'tax haven' and has never been blacklisted by any jurisdiction or authority
- A New Zealand Foreign Trust allows for the separation of powers that enable a diverse structural arrangement, delegating roles and responsibilities to appointed trustees that give the settlor more control and reliability
- No restrictions on distribution of capital or assets
- Minimal reporting requirements
- The NZ government has stated that the Inland Revenue will not entertain so called 'fishing expeditions' from tax treaty partners seeking details and information on NZ foreign trusts
- The details and information provided upon registration and formation are subject to existing tax confidentiality laws that ensure client non disclosure
- Your own (newly formed) or appointed corporate trustee can trade and place assets into the foreign trusts
- Ability to ameliorate time zone difficulties by using NZ entity as custodian trustee with a managing co-trustee or investment manager resident in a more convenient time zone
- No NZ governmental registration of filing of the trust is required
- No capital gains tax
- No audit of the accounts is required
Top Uses of a NZ Offshore Trust
- Business entity
- Trading of assets
- Property holding or selling
- International investing
- Estate vehicle
- Asset Protection
- Succession planning
- Tax planning
- Protection against loss of assets
- Protection against creditor claims
- Forced heirship
- Safe alternative for trustees living in high-risk volatile jurisdictions
- Holding bank accounts, stocks and shares, insurance or assurance policies, real or intellectual property
Taxation of a New Zealand Offshore Foreign Trust
Under the New Zealand Income Tax Act of 2007, a NZFT is not subject to being taxed, provided that the trust satisfies the criteria below:
- The settlor is not a NZ resident
- The beneficiaries are not NZ residents
- Income generated from the trust originates from non-New Zealand sources
If however, income is received that is sourced from NZ, then tax is levied on only that portion of the trust’s income.
New Zealand Foreign Trusts do not have to pay any tax, if they satisfy the above conditions, which include, but are not limited to:
- No inheritance tax
- No income tax
- No value added tax
- No capital gains tax
- No gift duty
- No stamp duty
- No tax on the transfer of assets
Corporate Details of a New Zealand Offshore Foreign Trust
Anonymity, Confidentiality and Disclosure
A NZFT has minimal reporting requirements, although if a trust carries out business activities, it must keep a financial record, though it need not be submitted. Trust deeds are confidential documents and are not publicly registered.
It is required that a NZFT, through the resident trustee company, file the following with the NZ Inland Revenue:
- The name of the trust or code
- The trust’s date of settlement
- The name and contact details of the NZ resident trustee company
- If there is an Australian resident settlor. No details about the settlor or the beneficiaries need to be disclosed
Records of the trust’s financial position must be maintained by the trust company in New Zealand, even if the New Zealand trustee has not had formal financial statements prepared. The financial records are not filed with the New Zealand authorities.
The NZ government has made it clear that they will not entertain what are referred to as 'fishing expeditions' from tax-treaty partners or foreign governments seeking details or tax related information on NZ foreign trusts. A properly NZ trust is generally regarded as being unbreakable, with NZ trust law comparable to known asset protection jurisdictions like the Cook Islands.
A NZFT can be structured in a variety of different ways. The minimal number of individuals needed to establish a trust is two, though often a more complex arrangement is used.
A settlor forms a binding legal arrangement in cooperation with a trustee, through which a transfer of assets is made from the settlor to the trustee who is entrusted with the legal title of the trusts assets, to manage and distribute for the benefit of a named beneficiary. The details related to the holding and distribution of the assets is contained within a trust deed in which the trustee is bound under NZ law.
A settlor is the individual forming the trust and whose assets are to be transferred into the trust. Once the deed has been signed and the trust created the settlor does not have legal control over the assets within the trust (as it is now managed by the trustee for the intended beneficiary), though the settlor can make himself the beneficiary. The settlor may also act as a co-trustee or protector, which gives the settlor among other powers, a degree of control over management of the trust, to appoint trustees, and the ability to amend the terms of the trust or distribute assets.
The beneficiaries are the individuals entitled to the assets held by the trust. The settlor may be named as the sole beneficiaries or one among several other beneficiaries. Beneficiary amendments, rights, and benefits are usually specified within the trust deed.
The use of a protector is used as a measure of protection and security for any possible problems that might arise and as a potential counterbalance to the broad powers had by a trustee. The protector is not a mandatory role, though the settlor can appoint himself or use a trusted individual (attorney, professional, family member) in which consent must be given for certain actions made by the trustee.
A trustee holds the legal title to the trust and is responsible for the overall management, whose powers are solely used for the benefit of the beneficiaries. A trustee may play many different roles and can take on any number of responsibilities under discretion of the settlor, usually outlined within the trust deed. A settlor may choose to have a separation of powers in which different parties may take up different roles.
Custodian Trustee – A custodian trustee is responsible for receiving, holding and disposing of assets of the trust outlined within the trust deed, which must be a New Zealand registered company.
Managing Trustee – A managing trustee is responsible for managing the assets of the trust and authorizing movements and instructions to the custodian trustee.
Advisory Trustee – An advisory trustee is responsible for overseeing the affairs of the trust, acting in an advisory capacity to the managing trustee.
The above-mentioned provisions enable the settlor a greater flexibility in establishing a management structure giving a variety of different arrangements to augment the exclusive control a foreign trustee providing a complete system of oversight and checks and balance to ensure proper asset management.
Yes. A NZFT requires that there be one (1) resident 'custodian' trustee, either an individual or a company.
Financial Statement Required
Records of the NZFT’s financial position must be maintained by the trust company in NZ. The financial records are not filed to the Register and are not public.
There are no restrictions. A NZFT may engage in any business activities provided that is lawful.
Type of Law
English Common Law with local NZ statues. NZ Trust law is modeled off on UK trust legislation
There are no exchange controls on foreign-exchange transactions that take place in NZ, regardless of whether residents or non-residents undertake the transactions.
Registered Office required
No. However, records of the trust’s financial position must be maintained by a resident NZ trust company.
Certain records need to be held by the resident trustee in NZ including:
- Copy of the trust deed
- Details outlining the settlements by the trust
- Details of the distributions made by the trust
- Names and addresses of the settlors and beneficiaries
- A record of the assets and liabilities and all sums of money received and sent by the trust
If the NZFT carries out business activities then the documents held by the NZ trust company must include, in addition: accounting information and codes of accounts including the accounting instruction manuals and the system documentation
Principal Corporate Legislation
The NZFT are enshrined under the New Zealand Trustee Act 1956.
The NZ government policy encourages the self-regulation of the industry. This has actually strengthen the efficacy of the sector, especially when such foreign trusts are held by ‘qualifying’ resident foreign trustee individuals or companies that regulated by the New Zealand Law Society or the Institute of Chartered Accountants.
There are no annual reporting requirements for a NZFT
Time Required to Form Offshore Trust
Language of Name
Double Tax Treaties
New Zealand has a total of thirty-five double taxation agreements that are in place with their main trading and investing partners. These countries include: Australia, Austria, Belgium, Canada, China, Chile, Czech Republic, Denmark, Fiji, Finland, France, Germany, India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, Norway, Philippines, Poland, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, United Arab Emirates, United Kingdom, and United States.
Minimum annual government fee NZD 50.00