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NZ Publishes Findings On Foreign Trusts

Tuesday, June 28, 2016

The New Zealand Government on June 27, 2016, released tax expert John Shewan's independent Inquiry into Foreign Trust Disclosure Rules, and the steps it is taking to strengthen tax rules as part of its work with the OECD to clamp down on base erosion and profit shifting (BEPS).

Shewan's inquiry noted that foreign trusts are legitimate vehicles and that New Zealand's tax treatment of foreign trusts is appropriate. However, it also recommended that disclosure arrangements should be strengthened, including by:

  • Strengthening the initial registration requirements for foreign trusts, and allowing regulatory agencies to search the register; and
  • Requiring foreign trusts to file an annual return, including their financial statements and details of distributions.

Finance Minister Bill English said: "The Government will look to implement the recommendations after officials have examined the Inquiry in detail and reported back to Ministers. A formal response to the Inquiry will therefore be issued in the coming weeks."

Revenue Minister Michael Woodhouse said that improvements to foreign trust disclosure rules are part of a significant work program to strengthen New Zealand's tax laws and keep them in line with international best practice.

"New Zealand has been working intensively with the OECD to develop a global response to BEPS tax strategies, which allow multinationals to pay little or no tax by exploiting discrepancies in different countries' tax rules and shift profits to places where tax rates are lower," he said.

In October the OECD set out an international action plan to help address this.

"The Government is today releasing the changes New Zealand will make to address profit shifting, based on the OECD action plan, as well as the significant steps we have already taken as part of this global effort," English said.

Woodhouse said a lot of work has already gone into strengthening New Zealand's tax rules, meaning that many of the OECD's recommendations are already implemented. "Our tax settings are already sound, but there is always room to improve," he said.

"We have already strengthened our controlled foreign company rules, thin capitalization rules, bank minimum equity rules, and, more recently, I introduced legislation to improve our non-resident withholding tax rules," the Revenue Minister said. "The next steps include stronger rules preventing excessive payments from a New Zealand company to its foreign parent, greater disclosure requirements for multinationals, and further sharing of tax data with foreign authorities."