Benefits of New Zealand Foreign Trust

Many people look for a decent low-tax jurisdiction to incorporate their offshore business. Most tax havens already acquired negative connotations and are not suitable in certain circumstances. New Zealand is a fresh choice.

New Zealand is a first world country, a member of OECD, which never was a part to any blacklists of harmful tax havens. It offers absolutely respectable international image and serious tax privileges at the same time.

The structure of interest is normally a New Zealand Foreign Trust, also referred to as New Zealand Offshore Trust.

The concept of foreign trust was introduced in 1988. It does not require to be officially registered for its recognition in New Zealand and worldwide, particularly in the countries with English law and those who joined the Hague Convention on the Recognition of Trusts or have double tax treaties with New Zealand.

NZ Foreign Trust with non-resident Settlors and a local NZ Trustee is considered a tax resident of New Zealand but tax exempted with all its offshore income.

What happens in practice in most cases, you incorporate your own New Zealand company with local NZ directors, then settle a Trust with this company being a Trustee. NZ Trustee company can conduct any international activities in its name but in favor of the beneficiaries, free of tax. An interesting fact is that this advantage is based not on a loophole in the law but instead on a specific, and very prudent in our understanding, interpretation of taxation basics by New Zealand tax authorities. The offshore income from such activities is not subject to tax in New Zealand, because it is not legally attributable to NZ company.

NZ Foreign Trust construction is good for nearly any business, be it trading or other commercial activities, savings and investments, holding of title to any property. As any other trust structure, it is an instrument for wealth management and protection.

It can be used as an independent business tool - as soon as the source of income is outside New Zealand it is tax exempt. You are only to make sure you are not subject to tax at the source of income.

The other remarkable feature is possibility to apply for double tax treaty protection. New Zealand has agreements with 35 countries. Each of them, of course, requires lawyer's interpretation, but as soon as you qualify for DTT protection, you may count on reduced withholding tax rates on dividends, interests and royalties. And the same income is not subject to any further taxation in New Zealand following its offshore nature.

One more thing is that comparing to other jurisdictions with similar benefits, NZ Foreign Trust is quite affordable in setup and ongoing maintenance.

To see more particular examples and benefits of new zealand foreign trust, please read our blog Offshore Advisor dedicated to offshore services and taxation.

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