New Zealand *
Trust
New Zealand has long maintained a reputation as a stable, transparent, and well-regulated jurisdiction for financial services and fiduciary structures. One such vehicle is the New Zealand foreign trust, commonly used in international wealth planning and asset protection strategies. These trusts are governed by New Zealand’s trust law, which is rooted in common law principles and was most recently updated by the Trusts Act 2019, which came into effect on 30 January 2021.
A New Zealand foreign trust offers unique advantages due to its strong legal foundations, robust regulatory oversight, and non-taxable status for foreign-sourced income. This article explores the key characteristics, formation requirements, tax treatment, and compliance obligations of New Zealand foreign trusts, while also considering the evolving global regulatory landscape in which they operate.
A trust is a legal arrangement where a settlor transfers assets to a trustee to hold and manage for the benefit of one or more beneficiaries. In New Zealand, the relationship is fiduciary in nature, and trustees are legally obligated to act in the best interests of the beneficiaries and in accordance with the terms of the trust deed.
A foreign trust, as defined under New Zealand tax law, is a trust where neither the settlor nor any subsequent settlor is a tax resident of New Zealand at any time during the existence of the trust. Such trusts are distinct from domestic trusts and are subject to a separate tax and disclosure regime.
Establishing a foreign trust in New Zealand involves the execution of a trust deed, which sets out the terms and conditions of the trust, including the roles and powers of the trustee, the rights of the beneficiaries, and any protector or advisory provisions.
A standard New Zealand foreign trust typically involves the following parties:
- Settlor: A non-resident individual or legal entity who establishes the trust and contributes the assets. The settlor must not be a New Zealand tax resident at any time.
- Trustee: At least one resident corporate trustee is required for the trust to qualify under the foreign trust regime. This trustee must be a licensed trust company or a professional trustee subject to anti-money laundering (AML) obligations and registration requirements.
- Beneficiaries: These may be specified individuals, classes of persons, or discretionary beneficiaries as defined in the deed. There is no requirement for the beneficiaries to be residents of New Zealand.
- Protector (optional): A protector may be appointed to provide oversight, including powers such as replacing trustees or approving certain trustee decisions. This role is not mandatory under New Zealand law but may be desirable in complex structures.
The trust deed may be irrevocable or revocable, discretionary or fixed, and may include provisions for accumulation or distribution of income and capital.
New Zealand foreign trusts benefit from a favorable tax regime for non-resident settlors. Specifically:
- Foreign-sourced income derived by a foreign trust is not subject to New Zealand income tax, provided the settlor remains a non-resident.
- New Zealand-sourced income, if any, is taxable in New Zealand.
- Distributions to non-resident beneficiaries of foreign-sourced income are not taxed in New Zealand.
It is important to note that if a settlor becomes a New Zealand tax resident, the trust may become subject to the settlor regime, whereby the trust’s income is attributed to the settlor.
Distributions from a foreign trust to a New Zealand resident beneficiary are subject to disclosure and may be taxable, depending on the classification of the distribution (e.g., beneficiary income, taxable distribution, or capital).
In response to international concerns about the misuse of trusts for tax evasion and money laundering, New Zealand has implemented a mandatory disclosure regime for foreign trusts. Key requirements include:
- Trust Registration: A foreign trust with a New Zealand-resident trustee must be registered with the New Zealand Inland Revenue Department (IRD).
- Initial Disclosure: The trustee must file a disclosure form providing details of the settlor, trustees, beneficiaries, trust deed, and any other information requested. Identity verification and information on the purpose of the trust are also required.
- Annual Filing: Trustees must submit an annual return, including financial statements, distribution details, and a declaration of continued foreign trust status. Distributions to beneficiaries must be reported annually, along with their country of residence.
- Anti-Money Laundering (AML) Compliance: Corporate trustees must comply with AML/CFT obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, including customer due diligence and ongoing monitoring.
Failure to comply with these obligations may result in removal from the foreign trust register, significant penalties, and possible criminal sanctions.
New Zealand foreign trusts offer a legally robust and tax-efficient structure for non-resident settlors seeking to manage assets across jurisdictions. With their foundation in common law and oversight by a transparent regulatory regime, they remain a viable vehicle for asset protection, succession planning, and philanthropic endeavors.
However, their continued effectiveness depends on proper compliance with both New Zealand’s disclosure requirements and the international tax and regulatory frameworks applicable to the parties involved. Professional advice and ongoing administration are critical to ensuring the integrity and sustainability of such structures in a rapidly evolving global landscape.
Legal *
Country code – NZ
Legal basis – Common law
Legal framework – New Zealand Trustee Act 1956
Formal name – Foreign Trust
Settlor – The settlor is the person who establishes and whose assets are put into the trust. It may be either an individual or a legal entity.
The settlor may also be the beneficiary of the assets and may, subject to certain provisions, retain control of the trust. There may not be protection from a subsequent bankruptcy after assets are gifted to the trust.
Trustee – Trustees are the legal owner of the assets who have a fiduciary and statutory obligation to act in the best interest of the beneficiaries.
New Zealand foreign trusts shall be administered by at least one resident custodian trustee, either an individual or a company.
Beneficiaries – Beneficiaries are those who get benefit from the trust. Beneficiaries may be natural persons or body corporates.
There are specific provisions to prevent beneficiaries from draining the trust of its assets and spending in a thrifty way. There are no specific legislative provisions regarding probate and forced heirship.
Protector – A protector is not mandatory, but may be appointed by the settlor. The settlor can appoint himself or use a trusted individual (attorney, professional, family member) in which consent must be given for certain actions made by the trustee.
Disclosure - A trust does not need to be registered with any statutory bodies. The trust deed is a strictly private arrangement between the settlor and the trustee.
Protection from foreign judgments – The Trustee act does not include provisions to ignore and not enforce foreign judgments. The Hague Convention on Trusts does not apply in New Zealand.
Protection from creditors – The Trustee act does not repeal the Statute of Elizabeth, so transfers by the settlor to the trust may be set aside if the settlor transferred the property before the debt arose. The creditor must prove the fraudulent transfer of assets to the trust, which is not defined by the law. Creditors’ claims may be brought jointly. If a fraudulent transfer is proven, the trust may be declared invalid.
Protection for immigrant trusts – Trusts that migrate from other jurisdictions do not benefit from retroactive protection.
Community property – Community properties transferred to a New Zealand trust may retain its community property character.
Exclusion of foreign law - There are no provisions in the legislation to be able to exclude foreign law.
Choice of law – The choice of law of New Zealand to govern the trust or a particular aspect of that trust, is valid, effective and conclusive regardless of any other circumstances.
Compliance – Certain records need to be held by the resident trustee in NZ including a copy of the trust deed. details outlining the settlements by the trust, details of the distributions made by the trust, names, and addresses of the settlers and beneficiaries and a record of the assets and liabilities and all sums of money received and sent by the trust
If the trust carries out business activities must keep accounting information. There are no annual reporting requirements.
- Settlor as a beneficiary *
- Bankruptcy protection * *
- Ignore foreign judgements * *
- Hague convention on trusts * *
- Choice of law is binding * *
- Protection from immigrant trusts * *
- Community property provisions * *
- Custodian trustee permitted * *
- Rule against perpetuities (years) * *
- No Specific exclusion of foreign law *
- Yes Settlor can retain control *
Protection of Settlor *
Protection from foreign judgements *
- Avoidance of forced heirship * *
- Spendthrift provisions * *
- Exclusion of Statute of Elizabeth laws * *
- Trust invalid if transfer fraudulent *
- Creditor must prove fraudulent transfer * *
- Clear definition of fraudulent transfers * *
- Separation of creditor claims * *
- Statutory limitation on fraudulent transfer * *
Protection of Beneficiary *
Transfers *
Taxes *
A trust established in New Zealand may not be subject to local taxes applicable to the assets and income of the trust, provided that no residents of New Zealand benefit from the trust and no physical assets are located there.
It must be noted that the choice of law of the trust would not be applicable to tax matters, which would be governed by the respective jurisdiction where the settlor, beneficiaries, assets or trustee are located, as applicable.
You should consult with your tax advisor or accountant to know the tax implications in your jurisdiction of residence when establishing a trust in New Zealand, transfer assets to it and receive profits from said assets.
- Offshore Income Tax Exemption * *
- Offshore capital gains tax exemption * *
- Offshore dividends tax exemption * *
- CFC Rules * *
- Thin Capitalisation Rules * *
- Patent Box * *
- Tax Incentives & Credits * *
- Property Tax * *
- Wealth tax * *
- Estate inheritance tax * *
- Transfer tax * *
- Capital duties * *
- - Offshore Income Tax Rate *
- - Corporate Tax Rate *
- 0% Capital Gains Tax Rate *
- 0% Dividends Received *
- 15% Dividends Withholding Tax Rate *
- 15% Interests Withholding Tax Rate *
- 15% Royalties Withholding Tax Rate *
- 0 Losses carryback (years) *
- Indefinitely Losses carryforward (years) *
- FIFOAverage cost Inventory methods permitted *
- 3% Social Security Employee *
- 3% Social Security Employer *
- 33% Personal Income Tax Rate *
- 15% VAT Rate *
- 58 Tax Treaties *
Country details *
New Zealand is a member of the Commonwealth. Located in the southwest of the Pacific Ocean and formed by two great islands: the North Island and South Island, along with many other smaller islands, standing out among them Stewart Island and the Chatham Islands.
The Kingdom of New Zealand also includes the self-governing autonomous states of the Cook Islands, Niue, and Tokelau. It has a population of over 4.5 million inhabitants.
The capital is Wellington, but its most populated city is Auckland, both located on the North Island. Its official languages are English, Māori and the sign language of New Zealand.
Its official currency is the New Zealand Dollar (NZD), being one of the ten largest global transaction currencies.
Its cities are among the best quality of life in the world. New Zealand is a developed country ranking high in international ranks such as the absence of corruption, educational attainment and economic freedom, human development index, democracy indexes, freedom and respect for civil rights.
New Zealand is a constitutional monarchy and a parliamentary democracy. The monarch of the United Kingdom is the head of State and has the title of King of New Zealand, under the law of royal titles of 1974. The monarch is represented by the governor general, who is appointed by her with the exclusive advice of the prime minister.
The governor general appoints the ministers of the crown with the advice of the prime minister who is, by convention, the leader of the governing party or coalition, that is, with the majority in parliament. The cabinet, headed by the prime minister, is the highest policy-making body and consists of the majority of the Crown ministers.
The New Zealand parliament is the representative of the legislative power and is made up of the sovereign (represented by the governor general) and the House of Representatives.
New Zealand has a modern, prosperous and developed market economy. It is very dependent on international trade, particularly for agricultural products.
Its main export products come from agriculture, horticulture, fishing, and forests, which are: dairy products, meat, wool, fruit, fish, and wine. Its most important manufacturing industries include aluminum production, food processing, metal fabrication, wood, and paper products.
However, the services sector is the most important sector, with tourism playing a major role in its economy.
The jurisdiction has an attractive regulation for the establishment of asset protection trusts. The New Zealand Foreign Trust regime provides protection against asset claims, confidentiality and tax exemption for trusts established by non-residents in its territory.