Inland Revenue has issued IS 25/18, addressing situations where receipts from foreign trusts and estates are subject to N.Z. income tax. IS 25/18 replaces IS 19/04, issued in 2019, providing further guidance on transactions with foreign trusts and foreign inheritances for N.Z. tax purposes.
Introduction and Scope
As with other recent developments in how N.Z. taxation is imposed on international transactions, this area is becoming increasingly more complex. Consequently, this article will be presented in two parts.
Part One will discuss the N.Z. income tax treatment of distributions from foreign trusts.
Part Two will discuss the N.Z. income tax treatment of receipts of property from foreign estates.
The scope of Part One is restricted to foreign trust transactions. Other types of trust exist, for N.Z. tax purposes, including complying and non-complying trusts. These are outside the scope of the following article.
Part One Distributions of money or property from a foreign trust to a N.Z. tax resident
Tax residents of New Zealand who receive a distribution from a foreign trust may be taxed in N.Z. on that receipt under the Income Tax Act 2007.
Distributions from a foreign trust are taxable as either beneficiary income or a “taxable distribution from a foreign trust”.
