The new disclosure regime for New Zealand foreign trusts is now in place and with the 30 June deadline for compliance now passed we can take stock of the current position. When the new rules were introduced last year there was a lot of commentary within the foreign trust industry in New Zealand that the new disclosure rules were too evasive. Resident trustees would need to provide to the Inland Revenue Department details of the settlor and beneficiaries, including addresses, email contact and tax identification numbers, as well as details of the amounts settled upon and distributed by the trust. Coupled with the introduction of an annual reporting regime and the strengthening of New Zealand’s tax information exchange network it was clear a large number of clients were concerned about these rules.
So what has happened? The picture is still unclear as the majority of disclosure was completed in the week leading up to the deadline. However, based on anecdotal evidence the amount of foreign trusts that have either been terminated or redomiciled to another jurisdiction is significant. Reports are that around 50% of existing foreign trusts no longer have any connection with New Zealand. There are almost certainly a number of trusts that did exist for unlawful purposes that have been weeded out. Conversely, other trusts where confidentiality was a driver based on the jurisdiction the settlor lives in have continued but in another jurisdiction with less onerous disclosure rules. Singapore has been the recipient of a lot of these trusts.
Once the initial reporting back log is cleared the IRD will then be able to provide definite numbers as to what has happened.