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Appendix – Extract from special report ­ Foreign trust disclosure rules

Extracted from Foreign trust disclosure rules – pages 16 & 17 of a special report published in March 2017 at taxpolicy.ird.govt.nz

“An ongoing requirement for the contact trustee following the registration of a foreign trust is to prepare an annual return for the foreign trust and send it to the Commissioner of Inland Revenue. This is set out in new section 59D [of the Tax Administration Act 1994].

Section 59D(2) states that the annual return must be in a form prescribed by the Commissioner of Inland Revenue and must include the following.

Information Detail
Financial statements for the trust for the return year (section 59D(2)(a)). If the trustee prepares financial statements or is required to prepare financial statements.
Settlements made on the trust in the return year, excluding the provision of minor services incidental to the activities of the trust (section 59D(2)(b) and (c)). Each settlement:
  • date
  • nature
  • amount
  • settlor’s name
  • settlor’s email address
  • settlor’s physical residential or business address
  • settlor’s jurisdiction of tax residence
  • settlor’s taxpayer identification number.
Distributions to beneficiaries made during the return year (section 59D(2)(d) and (e)).

Each distribution:

  • date
  • amount
  • nature
  • beneficiary’s name
  • beneficiary’s email address
  • beneficiary’s physical residential address
  • beneficiary’s jurisdiction of tax residence
  • beneficiary’s taxpayer identification number.

If the beneficiary is a minor:

  • minor’s age
  • minor’s jurisdiction of tax residence
  • minor’s taxpayer identification number
  • parent or guardian’s name
  • parent or guardian’s email address
  • parent or guardian’s physical residential address
  • parent or guardian’s jurisdiction of tax residence
  • parent or guardian’s taxpayer identification number.

At the time of registration, the contact trustee for a foreign trust must provide information about settlements made on the trust before the trust’s registration. To ensure that the information held by the Commissioner of Inland Revenue is kept up to date, subsequent settlements must be reported in the annual return. Consistent with the disclosure of historical settlements, information relating to the provision of minor services at less than market value that are incidental to the activities of the trust does not need to be provided. Also see the section ‘Information required on registration’.

Likewise, detailed information about distributions made during the return year need to be included in the annual return. This includes identifying information about beneficiaries, in line with the information provided at the time of registration.

Financial statements

As noted above, section 59D(2)(a) requires that if the trustee of a foreign trust prepares financial statements or is required to prepare financial statements, these must be provided with the annual return. The intent is that even if a trust does not prepare financial statements for other purposes, they must prepare financial statements in order to meet their obligations under the foreign trust disclosure requirements.

An Order in Council will be made under section 21C of the Tax Administration Act 1994 to specify the minimum standards for financial statements for foreign trusts. The Order in Council will make it clear for foreign trusts, including those that do not ordinarily prepare financial statements, what information must be provided.

Due dates

Section 59D(3) requires the annual return, including the financial statements, to be filed with the Commissioner of Inland Revenue within six months after the trust’s balance date, or by 30 September if the trust does not have a balance date (which is six months after the end of the tax year). This should allow resident foreign trustees adequate time to gather required documentation and meet their obligations, as it is acknowledged that much of the information may be held overseas.

Annual returns must be provided for every year that includes a period which the foreign trust is registered, or is required to register under section 59B. However, a transitional rule in 59D(1)(c) allows resident foreign trustees who become liable to register a trust on the date of enactment, to file returns only for years that begin after 31 March 2017.

No additional time is provided to non-professional trustees, or those with tax agents.”