Tax-exemption on Foreign Sourced Income
Under the new rules, to obtain a tax exemption on foreign-sourced income, the foreign trust must meet certain compliance obligations. The trustee must be registered to the trust and file an annual return with the New Zealand Inland Revenue (IR) and maintain the necessary trust records under the Tax Administration Act 1994.
New registration rules
Under the new rules, a New Zealand resident trustee of a foreign trust must register with IR and pay a registration fee (NZ$270). On registration the trustee must provide certain information to the IR. In summary, the trustee must provide:
- The name of the trust;
- A copy of the trust deed of the trust and any document amending the trust deed;
- Details of each settlement of assets on the trust (for a trustee company this requirement is for all settlements from the date that the trust was formed):
- Name of the person that made the settlement;
- Amount and date of each settlement;
- Nature of each settlement;
- The name, email address, physical residential or business address, jurisdiction of tax residence, taxpayer identification number of each:
- person who holds or controls any of the following powers: the powers to appoint and remove trustees, amend the trust deed or add or remove beneficiaries;
- trustee and person who controls the administration of a trust;
- beneficiary having a fixed interest in a trust;
- A declaration from the trustee registering the trust that the persons above have been informed of and agree to provide the information necessary to comply with the Tax Administration Act 1994 and the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and its regulations;
- For a discretionary trust, details of each beneficiary or class of beneficiaries sufficient to determine on a distribution whether a person is a discretionary beneficiary.
Time limits for registration
Trustee companies that act as trustees of existing New Zealand foreign trusts must meet the registration requirements by 30 June 2017. New trusts must register within 30 days of creation or a New Zealand trustee being appointed.
Annual return filing
A New Zealand foreign trust must file an annual return each year (and pay an annual fee of NZ$50). The annual return must be filed by six months after the trust’s balance date each year or, if the trust does not have a balance date, on 30 September each year). The annual return must include:
- The financial statements for the trust (if the trustee prepares or is required to prepare financial statements);
- Details of any further settlements on the trust in that year (in the same manner as is required for the initial disclosure of settlements upon registration of the trust);
- The date, amount and nature of any distributions to any beneficiary during that year;
- The name, email address, physical residential address, jurisdiction of tax residence, and taxpayer identification number of the beneficiary or beneficiaries receiving distributions in that year.
Confidentiality of Information
The information provided to IR is not available on a public register and is only disclosed to the IR for its tax administration purposes.
For further information on this subject please contact the Property and Personal Client team or your usual Jackson Russell adviser.
The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
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