Changes to New Zealand’s foreign trusts laws might show that using offshore trusts to hide assets is more prevalent than previously thought.
For many years, New Zealand has been thought of as a great place to hold foreign assets in trust. The nation had lax laws and allowed foreigners to have tax-free trusts with little oversight.
When the Panama Papers, the leaked emails of a law firm in Panama, were released, all that changed.
It was revealed that New Zealand was being used by some very wealthy people to hide assets from their own governments. This created some international pressure on New Zealand by other governments, as those other governments do not appreciate avoidance of their taxes.
In response to this pressure, the New Zealand government changed its trust laws. All foreign trusts were required to register, declare who controlled the trusts and declare who the beneficiaries of the trust were.
It was assumed this move would not be a burden for most foreign trusts, since there are many reasons someone might want to have a tax-free trust in New Zealand other than tax avoidance.
However, most foreign trusts have failed to register under the new law and many have fled the country, as the Wills, Trusts & Estates Prof Blog reports in “Trust the Kiwis.”
This suggests that using foreign trusts to hide assets is more common than previously thought.
Accordingly, government regulators will look for other ways to crackdown on trusts and make tax avoidance more difficult.
Reference: Wills, Trusts & Estates Prof Blog (June 20, 2017) “Trust the Kiwis.”
