NZ Foreign Trust and Look Through Company Regimes

New Zealand is a common law country that has a long standing and mature trust and foreign trust industry.

Trusts are extensively used for asset protection, tax planning and trading purposes. New Zealand Trust legislation, the Trustees Act 1956, is modelled on the United Kingdom Trust Legislation, the Trustees Act 1925, with some departures. It is possible to use a corporate trustee as the trustee of the Trust which offers greater flexibility and separates control further from the settlor.

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IRD Targets CA Firms for Tax Avoidance

Not surprisingly the IRD has commenced targeting CA firms and other professionals following the Penny & Hooper decisions.

The principle argument is that partners avoided the 39% tax rate by lowering their salaries and paying out profits as dividends to family trusts suffering only 33% maximum tax. In effect, CA firm partners were doing what Messrs Penny & Hooper were doing.The IRD has been auditing many CA firms. The surprising part however is their pre-conceived belief that regardless of the size of the firm, the number of staff and a host of relevant other factors, that the partners should have drawn out 80% of the profits as salaries, subject to tax at 39%.

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IRD Targets the Rich

For a number of years the IRD has targeted high wealth individuals and families in an effort to ensure that they have paid their fair share of tax, at least in the IRD’s eyes. Those (un)fortunate enough to make the annual NBR Rich List usually receive a bonus of being allocated their own personal IRD auditor to review and watch over their affairs.
With the Christchurch earthquake and economic downturn, the government’s need for revenue has translated itself into the muzzle being taken off the IRD, who are now much more aggressive in reassessing high wealth targets. Many recipients of the IRD’s attention feel they have complied with the relevant tax laws in filing their returns, only to find that the IRD takes a particularly aggressive position. Recent cases like Penny and Hooper have only added to the IRD’s arsenal of powers by allowing them to label anything they don’t like as simply being tax avoidance or black letter compliance.

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Tax Free Sunshine

You’ve worked hard, you’ve paid your taxes, and you’ve done well.  Thanks to all that hard work, you’ve managed to put together the ingredients for a comfortable retirement.  So what is keeping you here?  It can’t be the pleasure of living through another cold damp winter, surely.

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TAX BRIEF Mixed Use Assets

In the Budget 2011 the Government announced its intended review of the tax treatment of assets used both for private and income earning purposes (mixed use assets). A consultative document was released by the Inland Revenue Department in August 2011 and submissions to this consultative document were due by the 30 September 2011.

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