Some settlors and trustees are required to disclose certain trust information to the Inland Revenue.
Settlors that have to make disclosure
With some limited exceptions a settlor must disclose the existence of a trust and details of its trustees and beneficiaries if there is no resident trustee.
Disclosure is also required if a person who is a New Zealand resident makes a settlement on a trust as nominee for another person and there is no resident trustee at settlement.
Disclosure is made on form IR 462, “Settlors of trusts disclosure”.
Where disclosure is required the following information must be provided:
If disclosure is not made, in addition to any penalties for failure to comply, the Commissioner can determine the amount of trustee income for an income year. This means that a trustee that would not otherwise be liable for tax in New Zealand can incur a tax liability.
Resident trustees of foreign trusts also have disclosure obligations
Disclosure must be made by a resident foreign trustee. A resident foreign trustee is a New Zealand tax resident who acts as a trustee of a foreign trust that is not a registered charitable trust.
The resident trustee of a foreign trust must disclose:
Approved professional organisations include:
The disclosure for resident trustees of foreign trust is made on form IR 607 “Foreign trust disclosure”.
A resident trustee for a foreign trust must keep records disclosing the history of the trust’s administration including:
There are penalties for non-disclosure
A settlor who fails to make the required disclosure can be liable for a fine of up to $50,000.
The New Zealand resident trustee of a foreign trust that fails to disclose or keep records may be taxed in New Zealand on the trust’s worldwide income.
Inland Revenue’s policy is that penalties for failure to make disclosure will not apply if a resident foreign trustee is unaware of the disclosure obligations:
“If a resident foreign trustee has failed to comply with the new rules but was not aware of these rules, sanctions will not apply. As a matter of practice, if Inland Revenue is aware of the name and contact particulars of a resident foreign trustee, it will notify the trustee of his or her tax responsibilities as a trustee of a foreign trust, seek the required information disclosure and outline the record-keeping requirements. Whether a trustee is aware of his or her tax responsibilities will be a question of fact to be determined on a case-by-case basis, although it can be reasonably assumed that professional trustees and those trustees in the business of providing trustee services will be aware of the new requirements…”