Going by the media features on New Zealand’s foreign trust, one would be forgiven to presume that the country is a tax haven. The media reports painted the picture of an environment characterized by exotic lands, and prosperous people with questionable financial deals. However, Lawyer Geoffrey Cone opines that such a view is misguiding since the actual scenario is slightly mundane.
New Zealand does not fit the description of a tax haven
According to Geoffrey, New Zealand has never and is unlikely to feature on the OECD list of tax havens. The country simply lacks the characteristics of a tax haven, such as lack of transparency, an existence of unusually secretive private banking industry, the presence of laws and procedures that inhibit sharing of information with other governments, as well as the complete absence or existence of just nominal taxes.
The first Names on the OECD White List
New Zealand was among the first nations to make it to the OECD’s white list, thanks to the country’s extraordinary efforts of implementing domestic tax laws that correlate to the 2002 OECD Model on Exchange of Information on Tax Matters. The internationally agreed tax standards ensure tax transparency on foreign trust and that there is appropriate information sharing between governments.
Strict trustee requirements
In 2006, Michael Cullen, the then Revenue Minister introduced new trustee rules, to enhance transparency. For instance, a New Zealand resident holding a foreign trust must submit a copy of the Foreign Trust Disclosure form (IR607) to the New Zealand IRD. Also, he or she must keep financial records, the trust deed, settlement and distribution details, the assets and liabilities, the recipient’s information, as well as sums which the trustee receives or spends. If he or she fails to avail any of the above, they attract severe penalties.
Existence of numerous tax agreements
New Zealand has in place at least thirty-nine double tax agreements aimed at reducing tax impediments to cross-border trading and investing. It also has more than twenty tax information exchange agreements between countries, for preventing tax avoidance and evasion. Lastly, the nation just recently enrolled for a multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Why then the many foreign trusts in the country?
Many investors world over recognize New Zealand as a safe and stable environment, that has high-quality jurisdictions, characterized by good laws, efficient judiciary system, as well as decent and professional players. As a result, many people opt to invest in the country. It is worth noting, however, that the foreign trust is primarily for succession planning and not tax planning.
Evidently, as Geoffrey Cone rightfully puts it, “these are not the characteristics of a tax haven.”
Geoffrey or Geoff Cone is an International Tax and Trust Attorney based in Auckland New Zealand. He is a Senior partner at the Cone Marshall law firm, and he specializes in Wealth planning among global families across Latin America, Spain, and Italy.