The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill (‘bill’) was recently introduced in New Zealand. The bill contains a number of proposed amendments to the Income Tax Act and the Tax Administration Act.
From an international perspective, the bill provides measures for the New Zealand implementation of the G20/OECD standard for Automatic Exchange of Financial Account Information (‘AEOI’) in Tax Matters, and new disclosure rules for foreign trusts.
With respect to the AEOI, New Zealand acknowledges its role in buttressing the mechanics for detecting offshore tax evasion through the OECD’s Common Standard on Reporting and Due Diligence for Financial Account Information (‘Common Reporting Standard’).
This is especially so in the wake of the Panama Papers scandal, where New Zealand has been placed in the international spotlight for its lack of disclosure rules around offshore investments, notably, the use of foreign trusts to shield assets from taxation in any jurisdiction.
The bill also addresses this issue, which was reviewed recently by the New Zealand government. Pursuant to the Shewan report the bill contains proposed new rules for the registration and reporting of foreign trusts to the New Zealand government.
Proposals include:
- a requirement for resident trustees to register new foreign trusts within 30 days of formation.
- existing foreign trusts will need to be registered by 30 June 2017.
- an annual submission of an annual return including financial statements.
- payment of a registration fee of $270 and an annual filing fee of $50.
Currently, only minimal information is required to be disclosed to Inland Revenue including the existence of a foreign trust, the name of any New Zealand trustees, and whether there is an Australian settlor.
New Zealand resident trustees are currently only required to maintain the trust deed, details of settlers, and beneficiaries receiving distributions, to be made available to Inland Revenue upon request.
The proposed new disclosure rules contained in the bill, therefore, will provide greater transparency into the activities of foreign trusts with New Zealand resident trustees.