New Zealand foreign trust
The New Zealand foreign trust, very popular for estate planning, is a secure and effective estate planning structure for clients located anywhere in the world. Due to its settlor based tax regime, New Zealand foreign trusts are increasingly used as an alternative to trusts in zero-tax jurisdictions. Properly planned, a New Zealand foreign trust can provide exceptional tax efficiency and easily be combined with other investment structures in high-tax jurisdictions.
The New Zealand foreign trust offers the following major advantages:
• Settlements by a non-resident settlor are not subject to tax in New Zealand provided the settlement is not sourced from New Zealand;
• Distributions to benefi ciaries who are non-residents of New Zealand are not subject to tax provided the income does not have its source in New Zealand
• Trustees of a New Zealand foreign trust are not subject to tax in New Zealand, apart from income sourced from (earned in) New Zealand;
• An increase in the capital value of the New Zealand foreign trust’s assets held offshore is not taxable as there is no capital gains tax in New Zealand; and
• The New Zealand foreign trust may utilise the benefi ts of New Zealand’s double tax agreements.
In addition to the favourable Trust regime, there are another popular entity that can be used in estate planning and other activities.
It is the New Zealand Private Trustee Company (PTC). This entity can be used in connection with a Trust to provide control and comfort to a client where they do not wish to engage the services of a professional trustee company and/or they have complex assets and family businesses to contribute.
They are very easy to set up and are not regulated in comparison with some other locations, however it is important to correctly discuss the set up of the PTC for reporting purposes. Having a PTC enables the client to choose who will be the directors of the entity. Note that they need to be natural persons; no
corporates are allowed. This will enable appropriate and timely decisions to be made in relation to all aspects of the trust fund, from administration and investments to distributions.
