Concept
A New Zealand foreign trust — in the statute, a foreign exemption trust — has a New Zealand resident trustee but a settlor who lives abroad. The whole point sits in one quirk of local law: New Zealand taxes a trust by reference to the settlor's residence, not the trustee's. When no settlor is a New Zealand resident, the trust's foreign-source income falls outside the New Zealand tax net, and only New Zealand-source income is taxed. In practice the resident trustee is usually a professional trustee company that runs the trust under New Zealand common law while the assets and beneficiaries stay offshore.
History
Until 2016 the regime ran with almost no disclosure, and New Zealand foreign trusts surfaced in the Panama Papers leak as a quiet route for offshore money. The government asked John Shewan to review the rules; his June 2016 inquiry found them unfit for protecting the country's reputation. Inland Revenue opened a Foreign Trust Register that year, and the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 made registration and disclosure compulsory from 21 February 2017, with existing trusts required to comply by 30 June 2017. New Zealand sits inside the OECD and reports under CRS, so the instrument now trades on a credible legal system rather than secrecy.
Registration and Reporting
A resident trustee must register the trust with Inland Revenue (IRD) within 30 days of it becoming a New Zealand foreign trust, or of a resident trustee's appointment. The registration fee is NZ$270 and the annual fee NZ$50, both GST-included; neither applies when every trustee is a natural person who is not a professional trustee. IRD usually processes a registration within ten working days. After that the trust files an annual return within six months of its balance date — or by 30 September where it has none — attaching financial statements and a record of every settlement and distribution for the year.
Disclosure
Registration names every connected person — settlors, trustees, beneficiaries and others such as appointers or protectors — with their address, country of tax residence and taxpayer identification number, plus every settlement made since the trust began. The register is not public, but Inland Revenue shares it with the New Zealand Police and the Department of Internal Affairs for anti-money-laundering work, and account information moves to treaty partners under CRS. The foreign-income exemption holds only while these records stay current: a lapse can cost the exemption for the year and draw a civil penalty of up to NZ$1,000.
⚙️ The exemption rests on one line: no settlor may be a New Zealand resident. Add a resident settlor and the whole trust changes tax status, which is why a careful trustee tracks the residence of everyone connected to the structure for its entire life.
Application
🔗 Related
Asset protection trusts · Trusts (Singapore) · Private Foundations · Succession Planning · CRS — Overview · Economic Substance · US Foreign Trusts (Form 3520)
The trust mostly holds and passes on offshore assets for families with no other tie to New Zealand: they want common-law trust law, a stable court system and judicial protection at a moderate price. Latin American settlors have been heavy users — the Financial Intelligence Unit still records Argentina among the most common home countries. As an asset-protection and estate-planning tool it sits alongside a Singapore trust or a private foundation, with reputation doing the work that secrecy once did.
Regulation, CRS and AML
New Zealand reports foreign-trust data the way other OECD members do. Resident trustees and the trust companies that serve them are AML/CFT reporting entities, so they run customer due diligence and file suspicious-activity reports. Under CRS the trust's financial-account information flows automatically to the home tax authorities of settlors and beneficiaries, and exchange-of-information requests reach the register directly. The same substance logic that now governs offshore holding companies applies to trusts: a real resident trustee, named connected persons and records an authority can pull on request.
The disclosure regime reshaped the market. Inland Revenue counted 11,671 foreign trusts in 2016; by the 2024 National Risk Assessment the number had fallen to 2,254, an 81% drop. What remains is a smaller, cleaner population held for genuine succession and asset-protection reasons rather than for hiding ownership. A New Zealand trust now signals a registered, reportable vehicle, which is the reverse of what drew some users before 2017.
How it compares
Against a Cook Islands asset-protection trust, New Zealand trades aggressive debtor shielding for reputation and treaty access. Against a Singapore trust or a foundation it offers the same succession-planning function inside a common-law system with a deep trustee industry. The costs are moderate but real: a professional resident trustee, annual accounts and the filing discipline the regime demands.
🍓 A New Zealand foreign trust pairs zero New Zealand tax on foreign income with the standing of a common-law OECD jurisdiction. The trade is openness: full disclosure to Inland Revenue, annual filings, and CRS reporting that reaches the settlor's home country. It rewards families who want clean structuring, not concealment.
This material is for reference purposes only and does not constitute individual advice.