In the midst of economic and geopolitical turmoil, it’s understandable why many businesses, international investors and high-net-worth individuals (HNWIs) become acutely focused on asset protection, succession planning and wealth maximisation, and the structures and vehicles that can help deliver on their goals.
In the search for certainty, they’re turning towards jurisdictions that not only offer such structures, but which can also boast a robust regulatory and legal framework, professional service providers and a favourable tax regime – no matter where in the world that might be.
While trust structures have long been a go-to for many HNWIs, they are becoming increasingly attractive for long-term asset management and succession planning. And against this backdrop, New Zealand Foreign Trusts (NZFTs) are gaining in popularity from settlors around the world.
Here are five reasons why that is the case.
1. New Zealand is a globally respected trust jurisdiction
Not only is New Zealand among the top ten places in the world to do business, it’s recognised globally as a reputable and compliant trust jurisdiction, in which NZFTs are just one of its offerings.
As an onshore, ‘white-listed’ jurisdiction, New Zealand has an internationally regarded, stable legal system and robust regulatory environment, with favourable (and modern) trust laws that have been in place for decades. What’s more, the country has well-established court systems and a reputation for rule of law and judicial independence.
2. NZFTs can be utilised by overseas settlors from around the world
An NZFT, as defined under New Zealand tax law, is a legal arrangement established by a settlor – anyone who has gifted or transferred value to the trust – who hasn’t been a resident of New Zealand at any time since the trust was settled. In simple terms, this means that any qualifying individual or entity from outside the country can set up an NZFT, making these structures an attractive option for international investors and wealth planners.
The trust assets, however, must be held by a New Zealand-resident trustee, who manages the assets in accordance with the details outlined in the trust deed. This is often a professional trust company.
3. Compelling tax benefits
NZFTs are exempt from New Zealand tax as long as the settlor and the beneficiaries aren’t residents of the country; the trust is compliant with the New Zealand Disclosure rules; there are no New Zealand assets; and any income generated from the trust originates from non-New Zealand sources.
This means that an NZFT won’t pay inheritance, income or capital gains taxes in New Zealand. As a result, income can grow within the trust or be distributed tax-efficiently, although it’s worth noting that beneficiaries may be taxed in their home countries. If any income is received from New Zealand sources, then only that portion is taxable.
4. Exceptional flexibility
One of the most compelling features of an NZFT is its flexibility. Individuals settling a trust can use it for international investing, estate planning, asset protection and holding property. The trust deed can also be tailored to suit complex family or succession structures.
Furthermore, NZFTs aren’t limited in the type of activities they can engage in – they can create a flexible management structure and can operate in virtually any onshore and offshore sector.
5. NZFTs offer highly valued confidentiality
When NZFTs are established and registered with the Inland Revenue, certain information on all connected persons must be provided. This information, however, is subject to existing tax confidentiality laws that ensure client non-disclosure. What’s more, trust deeds are confidential documents and aren’t publicly registered. Such privacy is essential to many settlors, often for highly personal reasons.
Here to help
While NZFTs are highly attractive, the very nature of trusts means that they are complex structures. Rules around establishment and reporting, and compliance with regulations (such as the Common Reporting Standard) need to be adhered to.
Our New Zealand team, based in our Wellington office, are experts in corporate and trust services, with a deep understanding of all associated regulatory compliance. We have a proven track record in assisting clients from around the world with the formation of New Zealand Foreign Trusts for both succession planning and asset protection.
Critically, we have professional trustees on the ground who can serve as local trustees for your NZFT. Speak to us if you would like to know how we can help you meet your trust ambitions.
Speak to our experts today
Discover the ways in which our private client services can enhance your business requirements.
