Cook Islands
Trust
The Cook Islands was one of the first jurisdictions to enact explicit asset protection and international trusts law, being one of the most popular for such matters.
Trust laws in the Cook Islands limit fraudulent transfer claims for 2 years and in some circumstances, it may be less than one year.
If the assets are transferred in a period in which the settlor is solvent, the transfer of funds cannot be set aside.
The legal provisions in force also establish certain conditions for a person to be able to be considered as the creditor and able to file a lawsuit before a court in the Cook Islands.
These provisions raise the burden of proof beyond reasonable doubt, for such reason, confidentiality laws prohibit the disclosure of banking information, except if there is the consent of the client.
Foreign judgments are not enforceable. If any person wants to file suit against the trust, he must hire an attorney in the Cook Islands to initiate the action, which is subject to strict compliance with requirements for him to proceed.
The settlor can maintain control over the trust and its property if it so provides.
Foreign bankruptcy rules are excluded.
The law specifies that fraudulent transfers are understood to require compliance with requirements to be assessed by a court.
The trust cannot be affected by the rules regarding heirs or spendthrift beneficiaries in the settlor’s jurisdiction.
Trusts may hold shares in underlying companies, without concern about the financial benefits of retaining such shares. Likewise, in relation to the foregoing, the ability of the settlor to supervise and intervene in the affairs of an underlying company may be limited.
Legal
Country code – CK
Legal basis – Common law
Legal framework – Cook Islands International Trust Act 1984 (Amended 1989)
Formal name – International Trust
Settlor – The settlor is the person who establishes and whose assets are put into the trust. The settlor of an International Trust in the Cook Islands may also be the beneficiary of those assets and may retain control of the trust. An international trust is not invalidated because of the subsequent bankruptcy of the settlor.
Trustee – Trustees are natural or legal persons who hold the title to the assets and manage the trust, but they cannot benefit from it. A sole or multiple trustees may be appointed. A custodian trustee is permitted, provided that the trust holds, but does not manage a property. Management of the property will be the responsibility of a managing trustee.
Trustee Liability – A trust deed’s provision may limit the liability of a trustee, or provide relief or indemnity.
Beneficiaries – Beneficiaries are those who get benefit from the trust. There are specific provisions to prevent beneficiaries from draining the trust of its assets and spending in a thrifty way. International Trusts allows avoiding both probate and forced heirship rules.
Protector – Optional figure appointed by the settlor who oversees trust’s operation and has the power to appoint trustees, and vetoes any actions that the trustee might make on behalf of the settlor.
Trust deed – The private document on which the trust is drafted is not needed to be filed with the Registrar.
Disclosure - Assets in the trusts are not disclosed to Cook Islands authorities and the law makes it a crime to identify who owns the trusts or to provide any information about them.
Protection from foreign judgments – The International Trust act provides specific provisions to ignore and not enforce judgments. The Hague Convention on Trusts does not apply in the Cook Islands.
Protection from creditors – The International Trust Act repeals the Statute of Elizabeth, so transfers by the settlor to the trust may not 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 clearly defined by the law. Creditor claims are separated and cannot be brought jointly. The Cook Islands has a one-year statute of limitations on fraudulent transfer. If a fraudulent transfer is proven, the trust may not be declared invalid.
Protection for immigrant trusts – Trusts that migrate from other jurisdictions may benefit from retroactive protection.
Community property – Community properties transferred to a Cook Islands’ international trust may retain its community property character. It is also possible to preserve the separate property status of assets held before marriage in a community property state.
Exclusion of foreign law - An international trust or disposition of property held by the trust will not be void, voidable, liable to be set aside or defective by reason that the laws of any foreign jurisdiction prohibit or do not recognize the concept of a trust, or that the laws of the Cook Islands are inconsistent with any foreign law.
Choice of law – The choice of law of the Cook Islands or any other law, to govern the trust or a particular aspect of that trust, is valid, effective and conclusive regardless of any other circumstances.
Compliance – International trusts are subject to a registration fee and an annual renewal fee.
- 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)
- Yes 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 the Cook Islands may not be subject to local taxes applicable to the assets and income of the trust, provided that no residents of the Cook Islands 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 the Cook Islands , 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
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 0 Losses carryforward (years)
- 30% Personal Income Tax Rate
- 12.5% VAT Rate
- 20 Tax Treaties
Country details
The Cook Islands is an archipelago of fifteen small islands, located in the South Pacific Ocean, between Hawaii and New Zealand. It is a member of the Commonwealth and it is freely associated with New Zealand. Cook Islands citizens are also New Zealand citizens.
The islands have a combined area of 236 sq. km, but the Exclusive Economic Zone occupies more than 1,800,000 square kilometers of ocean.
It is populated by about 21,000 inhabitants. Most of them living in Rarotonga Island, where is found its capital Avarua and its international airport.
Its official languages are the Cook Islands Māori and English. Its official currency is the Cook Islands dollar and the New Zealand dollar, the first pegged to the second.
The Cook Islands is a dependency with a representative parliamentary democracy, where the Chief Minister is the Head of State. The islands are self-governing in free association with New Zealand and are fully responsible for internal affairs. New Zealand retains some external affairs responsibilities, in consultation with the Cook Islands.
Its economy, like other South Pacific islands economies, is hampered by its isolation, lack of exploitable natural resources, a natural disaster-prone location, and poor infrastructure. Tourism is the main source of income and, to a lesser extent, the cultivation of tropical fruits and their processing, manufacture of clothing and handicrafts.
In addition to tourism, the other main economic sector is the offshore industry. The Cook Islands has attractive legislation that makes it possible to set up tax-free international companies, offshore banks, insurance companies, and asset protection trusts.
Tax treaties
Tax treaties Map
Services
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