Inland Revenue is working through around 3,300 applications from foreign trusts wanting to join the new disclosure regime.
The June 30 deadline for registering these entities has passed but the processing of applications will continue over the next few months.
The new rules were created following the publication of the Shewan report last year, which recommended tougher disclosure rules for foreign trusts in New Zealand.
International Revenue Strategy Manager John Nash says foreign trusts are now required to fill out a comprehensive form, provide a copy of the trust deed, list beneficiaries and pay a registration fee.
“We’ll be expecting them to file an annual return with Inland Revenue from next year, which must include financial statements.”
Processing the applications has proved to be a labour intensive task with Inland Revenue setting a high bar for the quality of information it expects. Each application is being thoroughly examined with any irregularity raised with the trustees.
Around 3,200 foreign trusts have informed Inland Revenue that they don’t want to be part of the new regime.
Mr Nash says there could be a number of reasons why some have chosen to leave.
“Trusts are inherently private matters and people who form trusts for genuine succession planning and wealth distribution reasons prefer that their affairs are not subject to detailed disclosure.
“There are also now considerable compliance costs imposed by New Zealand including not just registration but annual returns and the preparation of financial statements.”
Over the next few months Inland Revenue will be cross-matching the new information against the disclosures we had under the old regime and carrying out a range of verification checks.
Mr Nash says there are a large number of trusts who have missed the deadline to register.
“I think the best advice to them would be to contact Inland Revenue before we contact them.”