"I believe fundamental honesty is the keystone of business". Harvey S. Firestone (1868 - 1938)
Today the Government announced its response to the Shewan Inquiry on Foreign Trusts in New Zealand. Refer to our previous blogs on this.
“The Shewan Inquiry’s recommendations are sensible and well-reasoned and by acting on all of them, we will ensure that our foreign trust disclosure rules are strengthened and New Zealand’s reputation is protected. The changes to the foreign trust rules are a matter that the Government intends to move quickly on" says Finance Minister Bill English. While Revenue Minister Michael Woodhouse added that the Government agreed with all the recommendations, and will implement them with some "tweaking". A Tax Bill will be introduced in August 2016 to implement many of these recommendations (with others to follow later).
First thoughts? If the Government agree with all the recommendations and are going to implement them (with tweaking) - maybe they didn't go far enough? And, we hope that the Bill will not be rushed through. As we all know - "fast law is not good law".
Here are some key changes:
- Disclosure rules will be expanded
- A register will be established for Internal Affairs and the Police to search (but not for foreign regulatory agencies to search, at least for the present)
- Signed declaration by settlors and trustees to agree to comply with New Zealand tax record keeping, Anti- Money Laundering (AML) and Countering Financing of Terrorism Act (CFT) and Regulations, and exchange of information and reporting standards [we would have thought they had to comply anyway, so what is this declaration adding?]
- Disclosure of details of settlors; protectors; non-resident trustees; other controllers; beneficiaries of "fixed trusts" including underlying beneficiaries were there is a nominee beneficiary; and for discretionary trusts the class of beneficiaries plus disclosure on distribution.
- Lodging of the Trust Deed [already required]; annual return disclosing changes to previously disclosed information, annual financial accounts, distribution details and amounts; new settlements - due within 3 months of balance date.
- Registration fee $250, an annual filing fee $50 and an administration fee (to be determined).
- Reduction in sanctions for qualifying resident trustees in default of their obligations, but including them in AML/CFT requirements (once legal privilege issues are resolved).
- Expanded verification rules on underlying sources of funds, and identification on beneficiaries.
- Reporting of suspicious transactions - expanded, and sharing of information between New Zealand government agencies.
- Non-disclosure will result in the Foreign Trust being subject to New Zealand income tax (subject to relief on unintentional acts that are remedied immediately).
New Foreign Trusts will need to comply, with a transitional rule to bring in existing trusts by 1 April or 30 June 2017 (both dates are mentioned).
There will also be a later review of which Government agency will be best to administer these reporting requirements - potentially the Companies Office.
Plenty to be getting on with then. We hope that these changes help to reinstate New Zealand's reputation as a safe and honest country that meets its obligations to the global community.
If you would like to know more about how this could affect you as a trustee or beneficiary then contact us.