The leak of documents from Panama-based law firm Mossack Fonseca (the “Panama Papers”) have caused the media to question the role of New Zealand Trusts established by non-residents as part of global solutions to asset planning.
Trusts are used by many New Zealanders to hold family assets. The overriding motivation for establishing family trusts are to preserve, protect and manage family assets so that wealth management and succession planning goals can be achieved. This motivation is not limited to New Zealand residents.
New Zealand has a stable government and a robust legal system. A government press release
(4 April 2016) notes that NZ has a very sound tax system with world-class tax rules. These factors make New Zealand an attractive jurisdiction for people who are seeking to preserve and protect their family assets.
An article by Richard Taylor
considering non-resident trust use in New Zealand was published in the Journal of Tax, Trust and Corporate Planning in 2015. In this article there is a summary of the application of tax agreements and privacy and disclosure rules to New Zealand Foreign Trusts. The article notes that there is an increasing focus on the sharing of information to combat international tax avoidance.
Foreign Account Tax Compliance Act (FATCA) reporting obligations have been in place since 1 July 2014 requiring information to be shared with the US where a trust has US indicia associated with it. The OECD Standard for Automatic Exchange of Financial Account Information in Tax Matters (better known as the Common Reporting Standard or CRS) will come into effect in NZ on 1 July 2017 and will provide for multilateral information exchange between over 90 jurisdictions.
The FATCA and CRS reporting obligations may apply to trusts established by New Zealand residents (for example, where family members have relocated to another country either permanently or simply to undertake their “Big OE”) as well as to trusts established in New Zealand by non-residents.
Trust law in New Zealand is currently in the process of being reviewing and updated. The Law Commission tabled its final report in Parliament in September 2013. The key recommendation to enact a new Trusts Act has been endorsed by the Government and work on the detail is being progressed. TGT Legal considers that this development will be a favourable step forward for any non-resident considering using a foreign trust in New Zealand.
UPDATE (12/04/16): Listen to Richard Taylor speaking on Radio New Zealand Morning Report
about the checks undertaken by TGT Legal when setting up New Zealand Foreign Trusts and the benefits of greater regulation of trustees.