There has been recent media coverage in New Zealand about foreign trust which portrays it like some exotic story. However, anyone who knows better understands that there is nothing exotic or exciting about taxes and New Zealand happens to be known for not being a tax haven. For countries that have tax havens, they impose little to no taxes and also have some sort of tax transparency in their governments. New Zealand does not follow this tax transparency procedure. Some believe that New Zealand has some large and secret banking industry. However, they do not.
One way in which New Zealand has proven that they are a leader in tax transparency is in the way that they handle their foreign trusts and the requirements that they place on the trustees of these trusts. All of this is used in assisting foreign governments who might need to request such information. The new rules on these requirements ask that a trustee in New Zealand of any foreign trust has to submit a disclosure form as required by the IRD. The foreign trust holders will also be required to keep detailed financial records for the purpose of taxes as well. These records will need to include details of settlements and distributions, trust liabilities, the trust deed and any assets or money that the trustee receives and spends.
In a majority of countries, the person who settles a trust is required to report the settlement of the funds to their own government for tax purposes. New Zealand has a total of 39 double tax agreements which are used to help reduce the tax implications for cross-border trade and investments. On top of the double tax agreements, New Zealand also has more than 20 additional exchange agreements for tax laws concerning other countries. These are used to help keep tax avoidance and tax evasion cases low. None of these are typical characteristics of tax havens.
New Zealand does not compete with tax havens. Alternately, they interact with other countries’ jurisdictions. Some of these countries include Britain, Singapore and the United States. All of these governments have a more transparent form of tax system and apply similar tax principles for foreign trusts like New Zealand does. Some admit concern over the rules of foreign trusts. However, the concern would be much better directed towards the regulations involving the trusts and making sure the companies of the trusts all follow the same high form of standards.
Geoff Cone is a leading partner for the Cone Marshall law firm. The firm is known for working closely with global advisers and families. Mr. Cone has practiced in the area of commercial litigation law and tax and trust advisory work. He has made appearances in every level of court as leading counsel. The Cone Marshall law firm is the only one in New Zealand to exclusively work in the field of international tax and trust planning. Additionally, they provide their clients with trustee services and trust management through their other affiliated companies.