Just like for the tax heavens, also the name ALL BLACKS results from a spelling mistake (tax heavens instead of tax havens; and All Blacks instead of All Backs). Last night ALL BLACKS stroke again. Four years of absolute dominance of world rugby was capped with the retention of the Rugby World Cup in a captivating 34-17 win over Australia at Twickenham.
They have achieved the unachieved. The All Blacks are the holders of the Rugby World Cup, since 2011. They have proved once again they are able to dominate the highest levels also playing beyond their territorial boundaries.
Storm of Beta takes the occasion to present to you the New Zealand Foreign Trust.
GO ALL BLACKS!!!
New Zealand called Aotearoa (‘Land of Long White Cloud’) in Māori language, is composed of two main islands and a number of other small islands, in the South Pacific. In 1642, the Dutch explorer Abel Tasman was the first European to discover New Zealand. The English navigator James Cook mapped the country in 1769–70. Thereafter, whalers, sealers and traders arrived. “Beginning in 1814, missionaries tried to convert Māori to Christianity, and taught them farming skills, reading and writing. As more settlers arrived, the British government decided to take control of New Zealand. In 1840, Māori signed the Treaty of Waitangi with representatives of the British Queen, who sought sovereignty over the country. In return the Queen’s representatives promised Māori ownership of their land, and the rights of British citizens”. Let us spend, some words on the Māori Trust.
Māori land trusts are unique to New Zealand and make up a significant proportion of New Zealand’s trusts. Māori land trusts are generally not settlor-made but are created by order of the Māori Land Court. They are primarily land management structures. They continue in perpetuity and are, mostly, fixed trusts. Māori land trusts have a rather peculiar historical background: the trusteeship of Māori land was inspired to the ‘rangatira’, who guaranteed the wellbeing of the lands and communities.
Let us go back to New Zealand.
On 26 September 1947, the New Zealand gained the status of a dominion and the independence 40 years later. From mid-nineteenth century until the Second World War, New Zealanders lived off the ‘sheep’s back’. In 1893, New Zealand became the first State to give women the vote, among other liberal reforms.
Today, New Zealand is host to a very solid off-shore trust industry, particularly attractive to investors that wish to invest through the use of an offshore trust. There is a relevant number of trusts settled by non-resident-settlors in New Zealand (‘Foreign trusts’). Since 1987, the New Zealand Government has permitted trusts to be settled by overseas individuals and administered by New Zealand resident trustees (they need specific requirements though) without being levied any New Zealand tax. However, in not imposing tax on foreign trusts, New Zealand has a feature in common with the other “offshore” jurisdictions offering the offshore trust. It is traditionally used for the settlement of trusts by foreign investors with consistent wealth (such in the Channel Islands and Caribbeans), doing so enabling the trustees to take advantage of New Zealand’s extensive range of Conventions against double taxation (in respect of inward-flowing income). This choice of regulation reflects New Zealand’s fiscal policy: if a foreigner entrusts property to New Zealand trustees to administer, that is no sufficient reason for New Zealand to tax the income of that property. Similarly, the fact that a trustee is the legal owner of income is not by itself a reason to tax that income. Legal ownership is simply the form of the trustee’s controlling interest. It does not represent the substance of the position and therefore should not be decisive as to determine assessability. On the other hand, where the settler or beneficiary is resident in New Zealand, or where the income has a New Zealand source, New Zealand will seek to tax the income, and that will happen by taxing said income directly it in the hands of the trustee (if that is the most practical approach).
New Zealand is considered to have sophisticated levels of experience and practice from lawyers, accountants and even judges in dealing with trusts. Moreover, private trusts are not subject to any public registration qua trust, though if any taxable income is due, file returns shall be fulfilled… In addition to record keeping for tax purposes, trustees must comply with New Zealand’s anti-money laundering rules (see the Financial Transactions Reporting Act, 1996). The rules are just western countries’.
N.B: Let us recall that if the settlor is resident in Australia, the trustee must give a communication to the competent Commission pursuant to the New Zealand/Australia Convention for the Avoidance of Double Taxation 1995, Article 26; this rule guarantees the exchange of information between the two States.
- Law Commission Te-Aka- Matua-O-Te-Ture, Review of the law of trusts, A trust act for New Zealand, Report 130, August 2013, Willington (NZ).
- Te Ture Whenua Maori Act 1993, s. 235.
- Commentary on this is included in Waitangi Tribunal The Orakei Claim (Wai 9, 1987) at 5.1; Waitangi Tribunal Rekohu – A Report on Moriori and Ngāti Mutunga Claims in the Chatham Islands (Wai 64, 2001) at 9.7.2; at 6.7.6 and 12.7.
- John Prebble, New Zealand in Offshore Business Centre: a world survey (edited by Milton Grundy), Aparna Nathan, (London, 2008), pp. 175-179. Available at: ssrn.com.
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(Yes, this is indeed the term we coined for our loyal readers… Oh and yes, we are Star Wars fans).