One may consider New Zealand as a jurisdiction for setting a trust and as a bastion for asset protection. So why New Zealand?
In the 1930s the combination of the great depression and international political instability caused huge imbalances in the fiscal system of most world countries. Countries began to take draconian measures against their citizens including confiscation of gold, freezing of bank accounts and seizure of assets and pension funds. One of the few countries to avoid this was Switzerland which due to its political neutrality and strong currency was considered safe haven for many of the world’s wealthiest families. The Swiss banks became the model for safety and reliability as did Swiss companies.
Today with the impending financial instability and possible collapse of Europe, the uncertain dollar and the monetary crisis New Zealand is rapidly becoming the new Switzerland of the Pacific. New Zealand is quite a conservative island nation with a small population of 4.4 million, a business environment ranked as one of the top ten in the world and the lowest corruption index amongst the developed nations. Politically it is based on the English parliamentary model as is its legal system.
Its international reputation is coupled with the advantage of New Zealand’s Blue Chip Pedigree internationally as a generally high tax OECD country which (unlike most other such products) is not blacklisted and is not considered an offshore zone for tax treatment. New Zealand’s reputation gives it significant advantages for residents of South American countries which look unfavourably on the offshore industry, Canada and USA which have particularly complex expat legislation.
Further New Zealand is considered politically neutral; and assets owned by New Zealand Foreign Trusts will generally not be confiscated by most governments. Further New Zealand banking system is amongst the safest in the world: banks in New Zealand have never collapsed in the whole history of the country and are government guaranteed.
New Zealand has chosen to give the world the tax-free foreign trust structure.
A New Zealand ‘Special Purpose Company structured as the trustee of a non-resident New Zealand trust is not taxable and the trust and its beneficiaries are also non-taxable, except on income sourced in New Zealand. If the New Zealand ‘offshore’ company and trust have no connection to New Zealand whatsoever, then the entire structure is non-taxable in New Zealand; and if you consider the fact that the company owner and trust beneficiary can be the same person, you can see how this structure can prove attractive when it comes to the offshore formation of a company. One added benefit of establishing such a company structure in New Zealand is the fact that once established the company is generally free to do business, open bank accounts, or invest anywhere in the world. It becomes, in effect, a tax free offshore company but without the “tax haven” implications of the traditional offshore centers.
Depending upon the tax jurisdiction of the settlor, US persons being much more restricted than anyone else, a properly structured New Zealand Trust can provide some or all of these benefits:
- the assets of the trust are excluded from the settlors estate and thus incur no inheritance tax or death duties:
- the assets of the trust will be protected against personal claims against the settlor, or beneficiaries;
- confidentiality since the trust deed is a confidential document and is NOT publicly registered;
- avoidance of forced heirship in those countries which still have such laws; and
- in some cases, the tax-free accumulation of income.
Because of the above the holding of property funds or assets in a New Zealand Foreign Trust is one of the safest mechanisms for wealth protection. One of the most important aspects of making money is actually being able to keep it safe from those who want to take it away. That is why the concept of trust today is more valuable than it has ever been!