SUMMARY

TAX EXEMPT INTERNATIONAL TRUSTS
UNDER NEW ZEALAND LAW

Although New Zealand is not a tax haven or an offshore financial centre, it is possible to establish New Zealand resident trusts which are exempt from New Zealand taxation.

The key to the taxation of New Zealand resident trusts is the residence of the settlor rather than the residence of the trustees (unlike many other countries).  It must be emphasized that this is not a loophole in the law – quite the reverse.  The taxation of foreign settlor trusts with New Zealand trustees is codified in its taxation of trusts regime, and its trusts legislation, and has recently been revised and approved by the New Zealand Government.

In the typical case of a settlor gifting (non-New Zealand) assets into a New Zealand trust for the benefit of non-New Zealand beneficiaries the principal tax exemptions are as follows:

Income Tax:
None – provided there is no New Zealand source income.

Capital Gains Tax:
There is no CGT in New Zealand.

Inheritance or Succession Taxes:
There are no inheritance taxes or succession taxes in New Zealand.

As a consequence of this favourable state of affairs, foreign settlors may establish zero-tax financial planning vehicles in New Zealand.  For many international clients, this is much more attractive than using traditional offshore financial centres (many of which are black-listed in the settlor’s own country).

Apart from the fact that New Zealand is not a designated tax haven or offshore financial centre, it enjoys the following useful features for international trust and tax planning purposes: