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.

New South Wales

New South Wales now deems discretionary trusts to be “foreign persons”, unless the trust deed is amended before midnight on 31 December 2020 to:

  • exclude all foreign persons as eligible beneficiaries
  • prevent any amendment to the exclusion of foreign persons as beneficiaries, so that the exclusion is permanent and irrevocable.

This is the case even if none of the eligible beneficiaries of a discretionary trust are foreign persons.  Foreign land tax and duty surcharges may apply to trusts that fail to do so.  See NSW foreign duty and land tax surcharge

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).


Israel has a Trust Law originally enacted in 1979 that defines a trust as “the duty imposed on  a trustee to hold or to otherwise deal with assets under its control for the benefit of another, or for some other purpose.”  Trusts can be settled in accordance with the law as set out in the Trust Law, by a contract with the trustee or by deed of hekdesh (endowment).  For more information see The Israeli trust, Trust Quarterly Review , Dr Alon Kaplan and Meytal Liberman, June 2019

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.  Commentary from Fox Rothschild LLP and STEP International News Digest.

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

Taxation of transfers of property to trusts

In a 2019 decision the Tel Aviv District Court rejected the Israel Tax Authority’s (ITA’s) position that the transfer of real property into an Israeli residents’ trust is taxable as a sale of a right in land.

The background of the case relates to Canadian residents who established a trust for their Israeli granddaughter, and transferred several Israeli properties into it without consideration.

The settlors argued that the trust should be classified as an Israeli residents trust or an Israeli resident beneficiary trust so that that conveyance of the properties were not taxable transaction.

The ITA disagreed and was of the view that that Income Tax Circular 3/2016 classified the conveyance as the sale of a right in land, making it subject to the Real Estate Taxation Law, and liable to purchase and betterment taxes as if it were a gift of real estate direct to a beneficiary.

The Tel Aviv District Court upheld the Canadian settlors appeal ruling that section 75 of the ITO makes no distinction between the conveyance of assets, whether real estate in Israel, real estate abroad, or securities. Accordingly, the transfer of real estate properties to a trust of Israeli residents without consideration does not constitute a tax event.

Importantly, the court also stated that a change to the trust’s beneficiaries does not constitute a tax event either, as long as the trust assets have not been distributed.

Reference: Barnea Jaffa Lande


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).

A feature of Jersey trust law is that its Trusts (Jersey) 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 articles 47G and 47H of the Trusts (jersey) Law, that provide:

47G Power to set aside the exercise of powers in relation to a trust or trust property due to mistake

(1)  In this paragraph, “person exercising a power” means a person who, otherwise than in the capacity of trustee, exercises a power over, or in relation to a trust, or trust property.

(2)  The court may on the application of any person specified in Article 47I(2), and in the circumstances set out in paragraph (3), declare that the exercise of a power by a trustee or a person exercising a power over, or in relation to a trust, or trust property, is voidable and –

(a)  has such effect as the court may determine; or

(b) is of no effect from the time of its exercise.

(3)  The circumstances are where the trustee or person exercising a power –

(a)  made a mistake in relation to the exercise of his or her power; and

b) would not have exercised the power, or would not have exercised the power in the way it was so exercised, but for that mistake, and the mistake is of so serious a character as to render it just for the court to make a declaration under this Article.

47H Power to set aside the exercise of fiduciary powers in relation to a trust or trust property

(1)  In this paragraph, “person exercising a power” means a person who, otherwise than in the capacity of trustee, exercises a power over, or in relation to a trust, or trust property and who owes a fiduciary duty to a beneficiary in relation to the exercise of that power.

(2)  The court may on the application of any person specified in Article 47I(2), and in the circumstances set out in paragraph (3), declare that the exercise of a power by a trustee or a person exercising a power over, or in relation to a trust, or trust property, is voidable and –

(a)  has such effect as the court may determine; or

(b) is of no effect from the time of its exercise.

(3)  The circumstances are where, in relation to the exercise of his or her power, the trustee or person exercising a power –

(a)  failed to take into account any relevant considerations or took into account irrelevant considerations; and

(a)  would not have exercised the power, or would not have exercised the power in the way it was so exercised, but for that failure to take into account relevant considerations, or that taking into account of irrelevant considerations.

(4)  It does not matter whether or not the circumstances set out in paragraph (3) occurred as a result of any lack of care or other fault on the part of the trustee or person exercising a power, or on the part of any person giving advice in relation to the exercise of the power.’

The persons who may make such an application and who are specified in art.47I(2) of the Law are:

(a)   the trustee who exercised the power concerned, or the person exercising a power (as the case may be);

(b)   any other trustee;

(c)   a beneficiary or enforcer;

(d)   the Attorney General in relation to a trust containing charitable trusts, powers or provisions; or

(e)   any other person with leave of the court.

Also see:

  • In the Matter of the B Trust [2019] JRC 035 where delay in bringing an application to set aside a transfer of property due mistake is a factor in the exercise of the Court’s discretion
  • In the Matter of the J Settlement [2019] JRC 111 where the Court was asked for assistance so that trustees and individual beneficiaries would not suffer tax consequences on account of mistaken advice received.  In this case the Court considered the practical costs if the remedy is only to sue in negligence, but also a measure of caution regarding the exercise of the Court’s discretion where there has been aggressive tax planning and
  • In the Matter of the D and E Trusts [2019] JRC 246, which were declared in void in circumstances were trust assets were transferred into a “circular ownerless corporate structure that had the effect of terminating the trusts and consuming the trust fund by the resultant tax consequences to the beneficiaries.
However, the facility for correction may not extend to situations where a settlor has taken advice in relation to identified risks, but has misjudged the extent of those risks.  See Mistake or conscious risk taking?

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).


High-net-worth individuals are often attracted to Liechtenstein, known for its history as a tax haven and extensive private client sector. In establishing a trust or other legacy structure, Liechtenstein’s asset protection legislation is very supportive and includes a variety of structures.

One example of this is Article 18 of the Liechtenstein Institute of Professional Trustees and Fiduciaries’ Code of Conduct. This explains the circumstances under which settlors or beneficiaries can switch service providers for the trust or foundation.

For more information, see page 44 of the June 2019 STEP Journal.


See Malaysia and Indonesia Heading.


The Trusts and Trustees Act of 2004 established trusts in Malta. This Act incorporates the Hague Trusts Convention and makes Malta one of the few EU countries with a dedicated trust scheme. As a result, Malta’s trust market is growing, with practitioners, authorised trustees and clients all growing in numbers.

For more information, see page 59 of the June 2019 STEP Journal.


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.


Effective from 9 May 2022, Singapore has introduced a 35 per cent additional buyer stamp duty on the transfer of residential property into an inter vivos trust.  The purpose of the additional buyer stamp duty to is address inter vivos trusts where there is no  identifiable beneficial owner at the time when the property transfer.  Refunds will be granted where the sale of residential property is to a trustee holding assets on trust for one or more identifiable individual beneficiaries.  Testamentary trusts are exempt from the new rules.


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.


From March of 2019, Switzerland for the first time will have its own laws on trusts. The ball is now in court of the federal council, which will develop the substance of the law.

The way this will look is unknown, particularly as the Swiss civil system does not know of the concept of equity. Luc Thévenoz suggests that one possibility is to:

“build upon and expand the existing but under-developed law of fiducie (Treuhand)… As is already the case for trust assets, fiduciary assets should be considered as a special patrimony (Sondervermögen), separate from the fiduciary’s personal assets and liabilities, and dedicated to the interests of the beneficiaries… It would be firmly rooted in the legal principles of Swiss civil law while enjoying international recognition by way of the Hague Trusts Convention.”

For more information, see page 35 of the June 2019 STEP Journal.

The Swiss Federal Council has set 1 January 2020 as the commencement date of the Financial Services Act and Financial Institutions Act, introducing a regulatory system for the trust sector.

The most relevant regime for trustees is set out in the final version of the Financial Institutions Ordinance (FinIO), adopted yesterday (Wednesday 6 October) by the Swiss Federal Council. In addition to the Financial Services Ordinance (FinSO), also enacted, these ordinances mark ‘the beginning of a new era’ for trustees active on Swiss soil, bringing about ‘profound changes in the industry’, according to Fabianne de Vos Burchart TEP, Counsel at Charles Russell Speechlys.

The law firm says that the original proposals to regulate trustees caused some disquiet, with many professionals fearing that the Swiss legislature did not understand the nature of trust relationships and would regard trustees as just another type of asset manager.

However, three years of lobbying have produced significant improvements in the ordinances, says David Wallace Wilson TEP, Private Client Partner at law firm Schellenberg Wittmer.

An exemption from licensing has been created for private trust companies, as well as a detailed exemption covering various types of single family office structures. The educational and professional experience requirements applicable to members of a trust company’s senior management have also been adapted, in order to reflect industry standards. The legislation also recognises that trustees do not provide financial services and, as a general rule, do not act upon the instructions of clients.

A two-year transition period is being allowed for trustees to comply, and give time for the Swiss Financial Market Supervisory Authority (FINMA) to set up organisations to supervise the activities carried out by licensed trustees and portfolio managers. FINMA has started working on the guidelines they will be required to apply, in particular with respect to the risk categorisation of the soon-to-be licensed entities.

Both Swiss trustees and foreign trustees with a presence in Switzerland will have to apply for authorisation during the period. The regime will introduce additional compliance costs for trustees, and de Vos Burchart predicts that ‘certain actors will disappear as a result, whilst others will join forces with one another to reach a critical size that will allow them to cover their costs.’



  • Luc Thévenoz, Proposition pour un trust suisse, Revue suisse de droit des affaires et du marché financier, 920:2 (2018), pp.99-112

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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