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New Zealand register of foreign trusts will not be open to public

Thursday, 14 July, 2016

New Zealand’s Finance Minister, Bill English, has accepted all the recommendations of the recent so-called Shewan Inquiry into foreign trust disclosure rules. One key measure is a compulsory register of foreign trusts searchable by law enforcement agencies.

The Shewan Inquiry was set up in response to information revealed in the recent Mossack Fonseca client data leaks which raised concerns about about rules covering foreign trusts registered in New Zealand.

The reports alleged that New Zealand has registered 12,000-plus offshore trusts with unidentified beneficiaries and privately held accounts. Though that information could already be requested by New Zealand's own regulators under powers set out in the 2006 foreign trust rules, it was not immediately available to them, because trustees are currently not required to routinely file their records with the authorities.

This led English to announce an independent review led by tax expert John Shewan, formerly of PricewaterhouseCoopers, to assess whether the existing rules require any practical improvements.

Shewan's report, which appeared last month, recommended improvements to registration and disclosure of information, anti-money laundering rules and increased information sharing between government agencies.

English said the government intends to move quickly on the measures, and will table the legislation next month.

The principal reform will be a compulsory register of foreign trusts. Starting with the 1 April 2017 income year, foreign trusts will be required to register on establishment, and will have to submit annual updating reports. There will also be a transitional rule requiring existing foreign trusts to register, and to supply the information required by 30 June 2017. Each trust will pay a registration fee of NZD500, and an annual fee of the same amount.

The information disclosed will comprise the name, email address, foreign residential address, country of tax residence and tax identification numbers of the settlors and protector; non-resident trustees; any other natural person who has effective control of the trust, including through a chain of control or ownership; and beneficiaries of fixed trusts, including the underlying beneficiary where a named beneficiary is a nominee.

For discretionary trusts, any class of beneficiary not listed on the trust deed must be listed and each class of beneficiary must be described in sufficient detail to enable identity to be established at the time of a distribution or when vested rights are exercised. The trust deed will have to be filed with the registration form.

Every year, the trustees will have to report any changes to the information provided at registration, as well as the trust's annual financial statements and the amount of any distributions paid or credited, along with full details of the recipients.
This information will be kept by the Inland Revenue Department and will be searchable by the police and the Department of Internal Affairs, though not by members of the public.

Foreign trusts that have not fulfilled these obligations will not be granted the usual exemption from New Zealand tax on foreign source income.

Sources