New Zealand To Impose New Requirements On Foreign Trusts

by Mary Swire, Tax-News.com, Hong Kong

28 July 2004

Revenue Minister Michael Cullen revealed plans on Tuesday to amend the Tax Administration Act to impose new requirements on foreign trusts setting up in New Zealand and ensure the country can meet its international commitments to full disclosure with other tax jurisdictions.

“Foreign trusts will be required to have an IRD number, keep records for New Zealand tax purposes, provide certain information when they are first set up in New Zealand or appoint New Zealand trustees, and provide information to Inland Revenue on a regular basis,” explained Dr Cullen.

Under New Zealand law, foreign income derived by non-residents is outside the New Zealand tax base, “and rightly so,” added Cullen. “The government has no intention of changing that.”

Consequently, under current rules foreign trusts established in New Zealand do not have to file domestic income tax returns or keep records if they receive only foreign-sourced income.

“But this means that we may not be able to provide full information on foreign trusts operating here when foreign tax authorities request it – as many are entitled to do under a double tax agreement they have signed with New Zealand,” explained the Revenue Minister, adding:

“The law change will provide an effective mechanism for obtaining information on these trusts. New Zealand will collect, store and transfer the information to the relevant foreign tax authorities on request, and to Australia on an annual basis – as it has requested.”

The changes are to be included in the tax bill planned for introduction in November 2004, and will apply from April 2005.

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