The city of Tauranga in the North Island is home to Southpac Trust in New Zealand.
- New Zealand is an OECD member country with a strong, developed economy.
- New Zealand’s economy is dependent both on commodity production in agriculture, fishing, and forestry, and on foreign trade.
- New Zealand has access to a considerable network of tax treaties.
- It has the same day time zone for the Asia Pacific region and is usually 12 or 13 hours ahead of Europe.
- A common law jurisdiction and a highly regarded legal system that offers significant advantages to the international client.
New Zealand is recognised as one of the least corrupt countries in the world, ranking behind Denmark, Finland and Sweden. It is an active member of a number world organisations such as the OECD, WTO, World Bank, UN and FAFT. The country is therefore considered a reliable and safe country for a HNWI wanting to establish a New Zealand foreign trust as part of their wealth planning.
System of Government
New Zealand’s Head of State is the Sovereign, Queen Elizabeth II. The Governor General is the Queen’s Representative who carries out formal constitutional functions. The Executive and Judicial branches of the Government are separate and independent from each other, and is based on the Westminster model and is a self-governing member of the Commonwealth. New Zealand is a politically stable country with the rule of law being paramount. It is a common law country whereby the Judiciary interprets the law through the courts, and because of its remoteness and independence, it is less influenced by the decisions of the EU and/or other countries.
New Zealand imposes no capital gains tax, wealth tax, inheritance tax, or stamp duty. Its residents are subject to tax on world wide income and double tax treaties apply where applicable.
The following is a summary of taxation rates on individual persons residing in New Zealand.
Taxable Income Ranges (NZ$) Marginal Rate of Taxation
0 – 14,000 10.5%
14,001 – 48,000 17.5%
48,001 – 70,000 30%
70,001 – and over 33%
New Zealand is not perceived as a harmful tax jurisdiction by the OECD, nor a preferential tax regime or tax haven by other countries, but at the same time it offers a favourable tax
position for its New Zealand foreign trusts.
Unlike other jurisdictions, New Zealand foreign trusts are taxed by residence of the settlor rather than through the residency of the trustee. Therefore this means that so long as the settlor and assets of the trust are located outside of New Zealand, the trust will not be subject to New Zealand tax. The trust will only be subject to tax in the country within which the assets are based, or when capital or income distributions are made to a beneficiary where they reside and/or are domiciled. With zero tax liability in New Zealand, this ensures that the trust or beneficiaries are not taxed twice.
New Zealand’s tax authority, the Inland Revenue Department (IRD), holds information on all New Zealand foreign trusts however this information is not publically available. However, where a tax treaty partner makes a request for information, the IRD will not entertain general ‘fishing expeditions’ on information about a trust unless there is just cause.
In order to ensure that New Zealand foreign trusts are not subject to world wide income, at least one trustee must be a Qualifying Trustee. This means that the directors of the corporate trustee must be registered either with the New Zealand Law Society, Institute of Chartered Accountants or The Society of Trust and Estate Practitioners (New Zealand Branch). This ensures that anyone offering trustee services in New Zealand are technically competent and of high professional calibre.
Regulatory Requirements – AML/CFT, CRS and FATCA
New Zealand is an economically safe and stable country. It became a member of the OECD in 1973 along with 34 other member countries. As a member, it has adopted a number of policies and practices recommended by this intergovernmental organisation. It will be adopting the Common Reporting Standard (CRS) in early 2017. It has also passed legislation to combat money laundering and counter terrorism (Anti-Money Laundering and Countering Financing of Terrorism Act 2009), and has signed an Intergovernmental Agreement with the US Government assisting New Zealand financial institutions to comply with FATCA.
Uses of a New Zealand Trust
As one should diversify their investment portfolio, the same applies to wealth planning which should not be limited to the person’s home country. The settlor may envisage a different purpose for his/her wealth that cannot be provided for in their home country or in other jurisdictions. Trusts can be used as an independent and safe vehicle for wealth planning.
Placing the ownership of assets outside the home country of the settlor, ensures that the assets are safe from unforeseen circumstances such as an unstable government and/or risk of confiscation of assets, kidnapping or extortion, or potential settlor liability. A foreign judgment will only be recognised if that jurisdiction has a reciprocal agreement with New Zealand, and it has obtained registration of the foreign judgment from a New Zealand Court which will involve issuing court proceedings in New Zealand.
Reasons for a HNWI’s succession planning will differ for each person and will reflect their own family circumstances.
- Assets held within the trust can preserve inter generational wealth ensuring continuity of ownership after the settlor’s death.
- A trust will ensure that there is a plan in place for vulnerable members of the settlor’s family.
- A New Zealand foreign trust allows the settlor to avoid forced heirship in their home country. A trust gives a person the freedom to dispose their assets in accordance with their own wishes that may differ to foreign heirship rules governing the settlor.
- The assets held in the trust will not be subject to probate laws or inheritance tax after the settlor’s death.