The report of an independent inquiry established by the Government after the release of the ‘Panama Papers’ to consider the appropriateness of the rules for disclosure that apply to New Zealand foreign trusts was released last week.
The executive summary
and the full report
can be downloaded from our website.
A formal response will be issued by the Government in the coming weeks. The Ministers of Finance and Revenue have, however, observed that the recommendations look “sensible and well-reasoned”
and commented: “The Government will look to implement the recommendations after officials have examined the inquiry in detail and reported back to Ministers.”
Greater clarity from the Government regarding implementation of the recommendations in due course will allow us to provide guidance in considering the implications of the changes that will be made to the disclosure regime.
In summary the main recommendations relate to:
- the establishment of a register of foreign trusts searchable only by regulatory agencies;
- a requirement that the person establishing the trust, the settlor(s) and the trustees sign a declaration that they have been advised of and agree to provide the information to comply with tax record keeping, Anti-Money Laundering (AML) and the OECD Common Reporting Standards obligations;
- a requirement to provide information when a trust registers including details of settlors, protectors, non-resident trustees, any other natural person with effective control and underlying beneficiaries; and
- a requirement to provide a copy of the trust deed.
Ongoing obligations, including a requirement to file an annual return that includes any changes to information provided at registration, financial statements, and details of distributions.
AML obligations, including a requirement to verify the underlying source of funds or wealth settled on a foreign trust.
Adoption of the recommendations would mean that information, which in the past may have been provided to the New Zealand tax authority on request, would need to be provided at the outset and updated on an ongoing basis. This is consistent with global trends towards increasing transparency.
There are no recommendations for additional automatic information exchange (beyond the requirements of FATCA and the OECD Common Reporting Standards). It is not suggested that the long established and principled policy of not imposing New Zealand tax on foreign sourced income derived by non-residents (upon which the tax treatment of foreign trusts is founded) should be altered.