If your trust needs to be registered for FATCA but you have missed the 31 December 2014 deadline, there are a number of issues to consider. The main issues are the trustees will be in breach of the Tax Administration Act 1994 and may incur penalties; and if the trust holds US investments, the US government may impose a 30% withholding tax on those investments.
Where trusts have no US assets or US persons involved with the trusts, trustees may wonder what the rationale is for having to comply with these FATCA obligations and whether they can simply turn a blind eye to them. It is not clear how aggressively Inland Revenue will pursue trusts that have failed to comply with FATCA in circumstances where there are no US persons involved with those trust. Nevertheless, many trustees will be uncomfortable with a situation where they are in breach of New Zealand’s tax laws even if that breach could go undetected.
The most prudent course of action for all trusts that have FATCA obligations is to register or become a sponsored entity. The process is not overly complicated and once set up, annual compliance can be straight forward. Where a trust has failed to register, the simplest way to become registered for FATCA is to enter into a sponsorship arrangement with an entity that has already registered.
TGT Legal has developed a cost effective compliance solution for trusts to be registered as sponsored entities.