New Zealand Offshore Trust

New Zealand is increasingly being acknowledged as a safe and reliable location for an offshore trust as it has a good reputation as on OECD member (Organisation for Economic Co-operation and Development). The legal framework is a result of the New Zealand Government's deliberate policy choice rather than a 'loophole'. The framework has been in existence since 16 December 1988.

Essentially a New Zealand Foreign Trust will enable a person who is not a tax resident in New Zealand to establish a New Zealand Trust with a New Zealand resident Trustee and for that trust to hold offshore assets and to derive income from outside New Zealand but have no New Zealand tax liability.

The income tax liability of a Trust in New Zealand is determined by whether or not a Settlor is or has ever been a tax resident in New Zealand. New Zealand income tax legislation provides that foreign sourced income derived by a New Zealand resident Trustee is exempt income if the settlor of the Trust is not resident in New Zealand. Accordingly, a New Zealand established Trust with a New Zealand Trustee but no resident settlor and no New Zealand sourced income will have no New Zealand income tax liability.

Summary

  • If a New Zealand Trust (hereinafter in this summary referred to as 'the Trust'), operated by New Zealand resident Trustee, receives income from any place other than New Zealand that income is tax free in New Zealand.

  • Distributions made by the Trust of foreign sourced income or foreign sourced capital gains to its foreign resident beneficiaries will, in general, attract no income tax, capital gains tax, gift or estate duty in New Zealand.

  • The Trust can hold offshore property and derive offshore income. Provided that no income has been sourced in New Zealand, the trust has no New Zealand tax obligations and is not required to file an annual income tax return in New Zealand.

  • There is no capital gains tax in New Zealand. Any capital increase in the value of the trust's assets is therefore not taxable.

  • The Trust is able to hold or trade properties, enter into contracts, or conduct any type of business.