Trust quarterly review

Above and beyond

Henry Brandts-Giesen and Sarah Kelly provide an analysis of changes to the New Zealand foreign trust regime following the publication of the Panama Papers

Abstract

  • Media reports following the release of the so-called ‘Panama Papers’ generated commentary in New Zealand about the country’s participation in the offshore finance industry. Reports also questioned New Zealand’s ability to prevent and detect money laundering through foreign trusts.

  • On 19 April 2016, the New Zealand government commenced the Government Inquiry into Foreign Trust Disclosure Rules. On 20 June 2016, a report containing a number of recommendations was provided to the government. These recommendations were designed to achieve a balance between allowing foreign trusts to continue in New Zealand and materially reducing their use for illicit purposes.

  • The New Zealand Parliament enacted amendments to the Tax Administration Act 1994, and, since 30 June 2017, foreign trusts have been subject to increased disclosure requirements. This article provides an overview of the changes, their interaction with the Foreign Account Tax Compliance Act and the Common Reporting Standard, and the authors’ observations of the foreign trust regime in New Zealand since the new rules have come into force.

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    Since the late 1980s, New Zealand law-governed trusts have sometimes been used by international wealth planners to hold assets that are not situated in New Zealand, but transferred by a non-resident settlor to a New Zealand resident trustee. Such trusts are defined under the Income Tax Act 2007 as ‘foreign’ trusts.

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