A New Zealand Foreign Trust is a highly attractive structure for offshore investors
A New Zealand Foreign Trust is a Trust settled by a non-resident for tax purposes but with a New Zealand resident trustee. The resident foreign trustee is typically, but not necessarily, a company that is incorporated in New Zealand. Where possible, this company should be demonstrably controlled and managed in New Zealand.
New Zealand Foreign Trust’s are a popular entity type as a trust that is a New Zealand foreign trust as defined in the Income Tax Act 2007, will not be subject to taxation in New Zealand.
Essentially, foreign-sourced income derived by the trustee of a foreign trust is exempt from income tax in New Zealand, provided the settlor is not resident in New Zealand. Income derived in New Zealand by the trustee of a foreign trust is still taxable in New Zealand.
The classification as a foreign trust can change and so must be managed carefully.
If a company is used as the resident Trustee, there must be at least one director who:
To maintain a Trust’s status as an New Zealand Foreign Trust and obtain the tax benefits that flow from this, a resident foreign trustee must do the following each year: