International Jurisdictions


Foreign Purchaser Additional Duty (FPAD) applies to many acquisitions of Victorian residential property by  discretionary trusts. Where FPAD applies an additional 3% of duty is incurred.  The duty applies to certain post 1 July 2015 acquisitions of land by foreign purchasers.

The duty can apply to “resident trusts” as the definition of a foreign purchaser includes the trustee of a foreign trust. A foreign trust means a trust in which one of the following has a “substantial interest in the trust estate”:

a) a foreign trust means a trust in which one of the following has a “substantial interest in the trust estate”

b) a foreign natural person, and

c) another person that holds the substantial interest as trustee of another foreign trust.

A foreign natural person is broadly a natural person who is not an Australian citizen or certain visa holders.

Relevantly for discretionary trusts the FPAD rules provide that:

“If, under the terms of a foreign trust, a trustee has a power or discretion as to the distribution of the capital of the trust estate to a person or a member of a class of person, any such person is taken to have a beneficial interest in the maximum percentage of the capital of the foreign trust estate that the trustee is empowered to distribute to that person.”

This means any non-resident beneficiary can have the effect of  making a trust a foreign trust for the FPAD rules.

A similar provision applies in New South Wales following a ruling from the Office of State Revenue published on 22 December 2016, whereby the trustee of a discretionary trust is deemed to be a “foreign person” for the purposes of the Foreign Acquisitions and Takeovers Act 1975 (Cth), as modified by subsection 104J(2) of the Duties Act 1997 (NSW) if the class of potential beneficiaries of the trust could include a foreign person, even if that person is not specifically named. This ruling means that a surcharge tax at the rate of 0.75% will be levied on NSW residential land owned by a foreign person. This new surcharge is over and above the trustee’s regular land tax liability.

A new surcharge duty, at the rate of 4%, will also be charged on purchases of residential land in NSW by ‘foreign persons’. The surcharge duty is imposed on top of any duty payable under the general stamp duty rules.

Similar provisions now operate in other Australian jurisdictions as well.  See

British Virgin Islands

With effect from 30 March 2015,  Trustees of British Virgin Islands (BVI) trusts must now maintain records and underlying documentation of the trust for a period of at least 5 years.

The records that must be held include (but are not limited to) invoices and contracts relating to:

  • payments and receipts of money
  • sales and purchases of goods, and
  • assets and liabilities.

The records, which can be kept within or outside the BVI, must “show and explain” the trust’s transactions and make it possible to determine with “reasonable accuracy” the “financial position of the trust” at any given moment.

Failure to observe the new record keeping requirements (without lawful or reasonable excuse) constitutes a criminal offence that may be punished by a fine of up to $100,000, or a prison term of up to 5 years.

The assistance of Intuit Management Consultancy is noted.  See New Record Keeping Regulation for BVI domiciled Trusts.


Draft legislation implementing the trust reporting rules announced in Canada’s 2018 federal budget has been published.  The draft laws, which closely mirror the budget proposals, will take effect from the 2021 taxation year.

The legislation applies to Canadian-resident express trusts, including deemed resident trusts. “Express trust” is not defined, and is presumed to have its usual legal meaning.

The T3 form currently used for trust reporting will continue to be used, but will be expanded to request additional information. This includes the name, address, date of birth (if applicable), the jurisdictions of residence of the trustees, beneficiaries, settlors, and protectors, and their tax identification numbers. Presently the T3 return only requires disclosure of the trustees.

There is an exemption for most trusts with assets below CAD50,000 if the assets are limited to cash; certain debt obligations; publicly traded shares or debt; mutual fund corporation shares or trust units; or an interest in a related segregated fund. The de minimis threshold will not apply to trusts that hold private corporation shares or real estate will be required to file a T3 return.

Penalties will apply where reporting is not made.


Cayman Islands

Under recently passed legislation, certain Cayman Islands companies and Cayman Islands limited liability companies (LLS) will be required to maintain a beneficial ownership register that records details of the individuals who ultimately own or control more than 25% of the equity interests, voting rights or have rights to appoint or remove a majority of the company directors, or LLC managers, together with details of certain intermediate holding companies through which such interests are held.

The new rules are designed to enhance existing robust arrangements on the exchange of beneficial ownership information to assist law enforcement agencies combat tax evasion and money laundering.


Chinese residents can transfer assets to a private trust.  However, real estate assets transferred to trust will be treated as a sale for tax purposes and business tax, individual income tax, land added-value tax, stamp duty and deed tax can apply.

(commentary based on Hao Wang’s summary of the Chinese private trust in the STEP Journal July 2015, p 35).

Under the Chinese Trust Law the settlor, trustee and beneficiaries are treated as parties to a special contract pursuant to which:

  • the settlor has special rights that are extended to the beneficiaries
  • trustees cannot resign without the consent of the settlor and the beneficiaries
  • at least one beneficiary must be in existence when the trust is settled
  • the settlor has rights to information, and can have the power to remove trustees

(commentary based on Hao Wang’s summary of the Chinese private trust in the STEP Journal February 2015, p 43).


From 30 June 2016, information compulsorily reported by trustees to tax authorities is on-line and publically searchable by reference to the trust’s own official name or the names of settlors, beneficiaries or trustees.

See Creation in France of a Public Register of Trusts

Note that an injunction has since been filed by an American resident in France and a beneficiary of a trust has commenced proceedings for the equivalent of an injunction for the removal of the online register from the internet. The beneficiary has also asked for the administrative court to refer the matter to France’s constitutional court Conseil constitutionnel based on protection of her private life under the French constitution. The injunction hearing (to be heard in public) is on 19th July 2016.  See France National Register of Trusts – Injunction.

Following the Constitutional Court’s 22 July 2016 decision to abolish similar penalties for offshore non-disclosure, French tax authorities have reduced the penalties imposed on trustees for failure to comply with their reporting obligations.  Instead of 12.5 per cent of the trust assets, non-compliant trustees will in future be fined between 3.75 and 7.5 per cent.  There is a minimum penalty of EUR20,000.

Indonesia and Malaysia

The Indonesian foundations (yayasan) has origins that go back to the Dutch stichting.  The foundation is a legal entity where capital is segregated to achieve social, religious and human goals.  However, there are no specific members (beneficiaries).  Managers and administrators cannot be paid.  The management structure comprises trustees, a board and supervisors (commissioners) all of whom must be natural persons.  The trustees ensure adherence to the foundation’s constitution; the board is responsible for day-to-day management and the commissioner has a supervisory role.  The yayasan can be used for charitable purposes but also to meet social objectives and can be used to manage pension funds.

The founder of the yayasan cannot withdraw their capital and has no management or control rights.

The Indonesian foundation is created by notarial deed and must be approved by the Ministry of Justice and Human Rights.

The Malaysian Labuan foundation is a structure with limited liability created by deed and registered with the Labuan Financial Services Authority.  The Labuan foundation has a charter but few regulations.  The founder’s creditors cannot claim against two years after establishment.  The characteristics of the Labuan foundation are similar to a trust, but with the added advantage of limited liability and legal personality.  The Labuan foundation is managed through a council and officers who perform a similar function to company directors.

(commentary based on Dr Nico Francken’s summary of Indonesian and Labuan foundations in the STEP Journal July 2015, pp 27 – 28).


(commentary from Fox Rothschild LLP and STEP International News Digest)

Distributions to Israeli beneficiaries from foreign settlor trusts are not currently subject to Israeli taxes. However, under new legislation,  the trust’s distributions or its income will be taxed, depending on the trustee’s choice. The trust income will be taxed at 25 per cent of the amount allocated to Israeli beneficiaries; alternatively, distributions will be taxed at 30 per cent of the whole amount of the distribution, excluding distributions of the settler’s own funds. Distributions will be taxed by default if the trustee does not make the election.  Moving forward, trusts will only be able to be classed as foreign settlor trusts if the settlor and the beneficiaries are close relatives.

New reporting obligations have also been introduced for trustees and beneficiaries. Trustees must notify the Israeli Tax Authority of the settlors and beneficiaries of new foreign settlor trusts within 30 days of the trust being set up.

Israeli beneficiaries will be required to notify the tax authorities of any distribution received from a trust, even a foreign settlor trust. There are also technical changes to the rules for ‘underlying companies’ – companies that hold trust assets on behalf of the trustee. Such companies will in future only be eligible for tax exemption if they are notified to the Israeli authorities within 30 days of being set up, and are registered as 100 per cent owned by the trustee. They will also be excluded from claiming double tax treaty reliefs.

The Israel Tax Authority has since extended the deadline for registration of family trusts created by a non-resident settlor for the benefit of at least one Israeli resident. Beneficiaries of “relatives trusts” now have until 31 December to report them and to elect whether the trust is to be taxed on income or on assets.

See Israel plans drastic changes to taxation of foreign settlor trusts


Jersey has a central registry of company beneficial ownership, and all corporate and legal entities formed for non-residents are required to be formed through regulated trust and company service providers (TCSPs).

However, with effect from 30 June 2017 the reporting obligators will increase and Jersey’s government will require trust and  TCSPs to notify changes of beneficial ownership to the jurisdiction’s central registry within 21 days of learning of the change.

All Jersey corporate and legal entities will have to confirm their beneficial ownership information to the Companies Registry in the first half of next year. For corporate and legal entities administered by TCSPs, this will be the beneficial ownership information the TCSP already holds, based on risk-based money laundering guidelines.

It is also proposed that a register of company directors  will be introduced by the middle of 2018. There will be a three-month window before the middle of 2018 for companies to provide the required information. This register is not to be made public for the time being, though it will be available to law enforcement and tax authorities on request. This is a controversial issue, and the Jersey government will reconsider its decision if and when there is agreement on a global standard to make registers of directors publicly available.


Another feature of Jersey is that its Trusts Law allows provision for otherwise validly settled trusts to be declared  invalid due to a mistake on the part of the settlor.  See Representation of A re: G Trust 4-Sep-2018 where an otherwise validly constituted trust was declared invalid due to unforeseen tax consequences flowing from the settlement of UK situated funds onto a Jersey trust in circumstances where the settlor had not taken tax advice.


See Malaysia and Indonesia Heading

Latin America

Although Panama is the only Latin American country that is party to the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition most Latin American countries incorporate trust regulations in their domestic law – some regulate the tax treatment of income from foreign trusts.

(commentary based on Nicolas Malumian’s summary of common law trusts in Latin America in the STEP Journal March 2015, p 39).


Distributions from trusts established by Portuguese resident individuals to Portuguese residents will be taxed at 28% after new rules were introduced on 1 January 2015.  Previously trusts were not taxed in Portugal.

In addition, when a trust is wound up and the assets distributed to the settlor, this distribution will also be taxed at a rate of 28%.  However, distributions of corpus will not be subject to tax.

South Africa

(commentary based on STEP International News, 26 February 2018)

South Africa’s 2018 budget announced that distributions from foreign trusts that hold the shares of foreign companies may in future be taxed in accordance with proposals mooted during 2017.

The proposals, which reclassify distributions from discretionary foreign trusts to South African resident beneficiaries as income, were first published for discussion in 2017 as the Taxation Laws Amendment Bill. Previously shelved following resistance from tax practitioners, the proposals have been resurrected as part of the government’s long-term plan to deal with the treatment of foreign companies held by interposed trusts. The intention is to extend the controlled foreign corporation rules to foreign companies held through foreign trusts and foundations, to discourage the use of trusts to defer tax or re-characterise the nature of income.

No proposals were made in the budget for changing the taxation of local trusts, although estate duty was increased to 25 per cent on estates above ZAR30 million (USD2.6 million), with effect from 1 March 2018. The same applies to donations.

A further measure will be introduced to clarify which person bears the withholding obligation in respect of interest paid by a South African trust to a non-resident beneficiary after vesting. The rules dealing with the treatment of trust income do not deem the trust to have paid interest to beneficiaries if the beneficiaries are non-residents. This anomaly is to be resolved.

United Kingdom

It is estimated that £122 billion of property in England and Wales is owned by offshore companies.  England and Wales’ Land Registry will soon publish data showing the full set of an estimated 10,000 property titles owned by foreign companies. The stated aim of this move is to stop offshore companies or trusts  buying high-value UK property to “lauder” funds without disclosing the ultimate beneficial owner.

See Transparency of Business heading in Tackling corruption

Also see new reporting requirements for corporate trustees that require any “Persons of significant control” have new reporting requirements.

United States of America

Different jurisdictions have different rules regarding beneficiary information.  Some multi-state jurisdictions such as the United States of America have different rules or codes for different states and it is necessary to review the state statute applicable to the trust administration. Most states of America require that information about a trust and the interest that the beneficiaries have in the trust be delivered to the beneficiaries within a specific period of time. For example, the Michigan Trust Code requires notification to the beneficiaries within 63 days of becoming the trustee.


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