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What is a New Zealand Foreign Trust?
A New Zealand Foreign Trust is a trust entered into by a non-resident Settlor with a New Zealand Resident Trustee for the benefit of non-resident Beneficiaries, where no income is earned in New Zealand.
New Zealand Foreign Trusts are increasingly being used as an alternative to a tax haven trust for clients located in most places in the world.  Properly planned, it can offer excellent tax efficiencies.

What is a trust?
In common law jurisdictions such as New Zealand, a Trust arises where a property has a legal owner and a beneficial (or real) owner.  Trusts can be established by a document called a trust deed.  The trust deed states that the Trustee owns the property on trust for a listed group of people (the beneficiaries).  The trust deed, amongst other things, allows the Trustee to decide whether income earned by the Trust each year is kept in the Trust or passed to the beneficiaries.  The Trustee must act in the interests of the beneficiaries.

What is favourable about New Zealand law?
New Zealand has an advanced legal system derived from English common law. New Zealand’s trust law is highly flexible and facilitates the use of a New Zealand Foreign Trust for international tax planning. Combined with its international reputation and economic stability, New Zealand is a highly favourable country to establish a foreign trust.
What are the advantages of a New Zealand Foreign Trust?
A New Zealand Foreign Trust offers the following major advantages:

·    Settlements by a non-resident settlor are not subject to tax in New Zealand
·    Distributions to beneficiaries 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 earned in New Zealand
·    The New Zealand Foreign Trust may utilise the benefits of New Zealand’s 35 double tax agreements
·    Compliance and reporting requirements for New Zealand Foreign Trusts are minimal.  In particular no audit of the New Zealand Foreign Trust is required and no annual tax returns need to be filed.

How do you establish a New Zealand Foreign Trust?
You can establish a New Zealand Foreign Trust by appointing or forming a New Zealand Resident Trustee Company and then executing a trust deed together with the New Zealand Resident Trustee Company to establish the Trust.

Who can be a Trustee of a New Zealand Foreign Trust?
You can either appoint a professional New Zealand Resident Trustee Company or alternatively form a Special Purpose Resident Trustee Company.

We act for Citco Trustees (New Zealand) Limited, a professional New Zealand Resident Trustee Company, which you can appoint to be a New Zealand Resident Trustee.  Citco Trustees (New Zealand) Limited is part of the Citco group of companies with a presence in 33 countries around the world.

How do you form a Special Purpose Resident Trustee Company?
It is very easy to form a Special Purpose Resident Trustee Company.
All it involves is incorporating a company in New Zealand.  The directors and shareholders do not have to be New Zealand residents and there can be just one director and one shareholder.

Companies in New Zealand can be easily incorporated.  All that is required is a proposed name, the names and residential addresses of the directors to be appointed, the shareholder or shareholders, a registered office and the number of shares to be issued.

There does not need to be a physical presence required for the directors or shareholders in New Zealand and any documentation required for the formation of a company in New Zealand can be submitted via email or fax. There is also no set requirement for meetings of shareholders or directors to be held in New Zealand.

However under New Zealand Financial Reporting legislation, a Special Purpose Resident Trustee Company would need to file financial statements with the New Zealand Companies Office if the shareholder is a company incorporated outside New Zealand.

What records must be kept for a New Zealand Resident Trustee?
The New Zealand Resident Trustee of a New Zealand Foreign Trust must keep the following types of records relating to the Trust:

·    Documents evidencing the creation and constitution of the New Zealand Foreign Trust
·    NZ IRD (tax department) disclosure information and records in respect of the Trustee
·    Details of assets and liabilities of the Trust
·    Details of money received and spent by the Trustee
·    Details of settlements and distributions made by the Trust
·    General accounting and financial records.

What records must be kept for a Special Purpose Resident Trustee Company?
A Special Purpose Resident Trustee Company must maintain a variety of documents at its registered office including a minute book, a share register and financial statements (accounting records).

What are the advantages of a professional New Zealand Resident Trustee?

The advantages of appointing a professional New Zealand Resident Trustee include no reporting, audit or filing obligations to be concerned about. The administration of the Trust will be carried out by professionals who have up to date knowledge of and experience with the New Zealand law.

What can we do for you?
We can do everything you need to set up and administer a New Zealand Foreign Trust including:
·    Drafting the trust deed and all ancillary documentation
·    Providing a professional New Zealand Resident Trustee, namely Citco Trustees (New Zealand) Limited
·    Forming a Special Purpose Resident Trustee Company for you
·    Registering the New Zealand Foreign Trust with NZ IRD as required by law
·    Providing a registered office for the New Zealand Foreign Trust and the Special Purpose Resident Trustee Company
·    Carrying out all administrative and compliance obligations for both the New Zealand Resident Trust and the Special Purpose Resident Trustee Company.