Commitment to transparency
Article 5 minute read

Commitment to transparency

20 January 2017

The new disclosure requirements for New Zealand (NZ) foreign trusts will come into effect on 30 June 2017 for existing foreign trusts. New foreign trusts will need to register within 30 days of establishment. Foreign trusts will need to comply with the registration and filing obligations to qualify for the exemption on tax for foreign-sourced amounts.

The NZ trust regime is a ‘settlor’ based regime. This means that the NZ tax treatment of the trust depends on where the settlor of the trust is resident. The trust needs at least one NZ resident trustee and it will not be liable for tax in NZ except in respect of NZ sourced income, as long as the trust continues to have no NZ resident settlors. A ‘settlor’ is defined very broadly and there are extensive provisions designed to catch indirect settlements through nominees and by other means.

Current disclosure regime

The current disclosure regime is light-handed and requires the foreign trust to be registered with the NZ Inland Revenue Department (IRD) with the name of the trust and full details of the trustee, and confirmation that none of the settlors is an Australian resident.

The trustee is also required to keep full records of the trust’s activities and have them available for inspection by the IRD. No regular reporting is required except for changes to the details originally supplied to the IRD.

The Panama Papers

Following the Panama Papers incident, the NZ Government appointed an independent advisor (tax expert John Shewan) to review the NZ foreign trust disclosure rules. The view was that the current disclosure regime was too light, focused only on the NZ resident trustee and did not align well with wider anti-money laundering/combating the financing of terrorism (AMLCFT) obligations in terms of identifying ultimate beneficial owners and controlling persons.

The inquiry made a number of recommendations for improved focus on:

  • Registration and disclosure of information to government agencies (not publicly searchable)
  • Increased information sharing between government agencies
  • Anti-money laundering rules.

As the NZ Government is also committed to preventing anti-money laundering, there will be more comprehensive requirements for lawyers, accountants and real estate agents, among others. All these recommendations are now in the process of becoming law.

When the Shewan Inquiry report was released, the NZ Finance Minister, Mr English, said the government has always been open to making improvements to NZ’s already strong tax settings: ‘The Shewan Inquiry’s recommendations are sensible and well-reasoned and by acting on all of them, the Government will ensure that our foreign trust disclosure rules are strengthened and New Zealand’s reputation is protected.’

New disclosure requirements

The requirements below will come into effect in 2017 after enactment of the new legislation. Existing foreign trusts will have to register and supply the information by 30 June 2017. A register of foreign trusts will be established by the IRD. The register will not be public but will be searchable by law enforcement agencies (including Department of Internal Affairs and NZ police). 

New and current foreign trusts will be required to register and provide:

  • Confirmation that both the settlor(s) and the trustee(s) agree to provide information to comply with NZ Tax Administration record keeping, AMLCFT and Common Reporting Standard requirements
  • A copy of the trust deed
  • The name and other identifying particulars of the trust
  • The date and detail of each settlement on the trust
  • The name, email address, foreign residential address, country of tax residence and tax identification number of settlors, protectors, trustees, controlling persons and beneficiaries of fixed trusts (including underlying beneficiary where named beneficiary is a nominee)
  • Details of class of beneficiary in discretionary trusts, sufficient to determine on distribution or vesting whether a person is a member of that class
  • Details of any changes to the above information must be filed within 30 days of that alteration.

There will be a Foreign Trust Registration fee of NZD270 and an annual filing fee of NZD50. Foreign trusts will be required to file an annual return with the IRD within three months of the balance date that includes:

  • Changes to information provided at registration
  • The trust’s annual financial statements
  • Settlements on the trust in the relevant period and the name, email address, foreign residential address, country of tax residence and tax identification number of that settlor
  • Distributions paid or credited during the relevant period and the name, email address, foreign residential address, country of tax residence and tax identification number of the recipient beneficiary.

There will now be a mandatory requirement to verify in all cases the underlying source of funds or wealth settled on a foreign trust. Alongside this, there will be expanded guidelines for customer due diligence, on establishing and verifying beneficial ownership, effective control and source of funds in complex multi-layered structures. There will also be greater profile, scope and obligations on trustee service providers for suspicious transaction reporting. 


There are several advantages to using an NZ foreign trust, in particular, that information about settlors, protectors, beneficiaries and controlling persons is confidential and cannot be accessed by the public.

Assuming that the foreign trust will hold exclusively non-NZ situated assets and securities (most likely through a foreign underlying entity), it is unlikely that NZ sourced income could arise. It is important to remember that the exemption from NZ tax on foreign source income applies only to a foreign trust that has registered and fulfilled the associated disclosure obligations at that time.

NZ common law and equity is similar to that of the UK and there is significant appeal of a trust based in a ‘conventional’ OECD jurisdiction with an excellent communications, business and commercial infrastructure and a high standard of professional services. NZ is also not on any tax haven blacklists.

A positive step

The new disclosure regime for foreign trusts is viewed as a positive step for everyone involved. The new disclosure rules will have minimal impact on business when viewed in the context of impending disclosure requirements in other jurisdictions. The majority of the new NZ disclosure rules will align with the disclosure requirements under the Common Reporting Standard, an international reporting convention to which more than 100 countries (including New Zealand) have already committed.

Importantly, client privacy is maintained as the information required to be disclosed to the IRD is not publicly searchable (unlike some other jursidictions).

These changes are consistent with NZ’s commitment to global transparency initiatives and will protect its strong and well-deserved reputation as an active member of the OECD. Allowing the operation of foreign trusts in NZ is consistent with the government’s policy of maintaining an open economy which welcomes foreign investment and an active financial services sector; this stance is unlikely to change.

Trustees, professional advisors and back office service providers to New Zealand foreign trusts will need to be aware of the new disclosure requirements and be ready to provide the additional information as required.

This article originally appeared in Governance and Compliance magazine.

Need more information? Get in touch with our New Zealand experts.

Written by

Philippa Lambert

Legal Director at TMF New Zealand

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