Recent Trust Legislation Changes
The Foreign Account Tax Compliance Act (“FACTA”), Anti-Moneylaundering Legislation (“AML”) and the Common Reporting Standard (“CRS”) are recent legislation aimed at preventing terrorist and criminal funding channels, reducing tax evasion, and bringing New Zealand in line with OECD guidelines. Unfortunately, one of the outcomes of this legislation is that from 1 July 2018, there will be a considerable amount of extra work required by lawyers and accountants for the various trusts they administer for their clients, such as additional layers of identification, and in some cases significant reporting requirements.
Also of concern to a number of our clients will be under the CRS where Trusts with:
- managed portfolios (where another Financial Institution has discretionary authority to manage its assets, whether in whole or in part)
- where 50% or more of the Trusts’ gross income is attributable to investing, reinvesting or trading in financial assets, (in the 3 year period ending on 31 March of the period preceding the determination)
- NZ resident trustees and they don’t report for CRS purposes in another tax jurisdiction
will be deemed “Reporting NZ Financial Institutions”, and will have comprehensive reporting requirements to the Inland Revenue, who in turn, will pass this information on to foreign governments. As this is only a very brief summary of the legislation and it’s outcomes, we are currently reviewing our list of client trusts for any that will fall into this category, and will notify those clients that this will have an impact on.