Number of foreign NZ trusts plunge after new disclosure rules

Nearly three quarters of New Zealand’s foreign-registered trusts have reportedly missed a deadline for new disclosure rules or said they don’t want to be a part of the new regime.

New Zealand had 11,645 trusts in April last year but fewer than 3000 provided more information to Inland Revenue under new law changes, which had a deadline of June 30, according to IRD.

Some 3000 said they didn’t want to operate under the new rules while 5000 didn’t respond, meaning they could be struck off.

Although some believe it shows New Zealand’s trust laws were being exploited, new costs (a one-off charge of $270 and $50 annual fee) and inactivity could also be factors.

"The lower number of registrations is not evidence that foreign trusts were being used for illegitimate purposes under the old regime," an IRD spokesman says.

"It’s possible that many of the trusts unaccounted for have previously wound up or moved offshore without notifying Inland Revenue."

The new rules were implemented after New Zealand was scrutinised in the Panama Papers scandal in 2015 — a trove of 11.5 million documents from law firm Mossack Fonseca which allegedly showed this country’s laws were being exploited as a tax haven.

An inquiry was then led by former PwC partner John Shewan, who was commissioned by the government to review New Zealand’s trust disclosure laws after the Panama Papers leak last year.

Mr Shewan’s report said this country’s disclosure rules for foreign trusts were light-handed and “not fit for purpose.”

It suggested new rules which required people setting up, or administering foreign trusts, to reveal financial information and the identity of any beneficiaries.

The government adopted the recommendations and ordered all trusts to re-register with IRD by June 30.

Last month just 70 foreign trusts had re-registered with Inland Revenue, which Green Party co-leader James Shaw said highlighted the previous scale of problems.

“We knew when these requirements were put into place that it would drive out trusts that were being used either for tax avoidance or perhaps criminal activity,” he said.

“What I hadn’t anticipated was the scale this number would seem to signify.”