Pre-Immigration Tax Planning Via Offshore Trusts
[IMPORTANT NOTE: The subject of global taxation is immensely complex and varies from jurisdiction to jurisdiction. The scope of this article is broad and does not constitute legal advice. Any individual concerned about global tax implications needs to discuss the subject in detail with qualified tax advisors in both their home country and in the foreign countries in which they are investing and/or considering as a future immigration destination.]
In the early 1990s, when LatourLaw began working with high net worth clients planning for U.S. immigration, many offshore trust jurisdictions were close and available to our Miami headquarters. The Bahamas, in particular, was a convenient place for our clients’ offshore trust formation and banking needs. And while the Bahamas remains a viable option, LatourLaw has exclusively been sending clients to New Zealand for years for a variety of compelling reasons.
New Zealand has grown as an international trust jurisdiction over recent years for a variety of reasons including its tax neutrality as regards “foreign” trusts and its economic and political stability. Unlike most other offshore jurisdictions, New Zealand has managed to maintain transparency and integrity. To put it bluntly: its laws are not inviting to international criminals, oligarchs, and dictators.
The nation’s trust structure complies with all international Due Diligence and compliance standards and is a member of nations which adhere to both OECD and FATF protocols. In addition to having an extensive list of international tax treaties in place, New Zealand is unique in that it has non-intrusive disclosure requirements…yet solid “filters” in place to prevent abuse of its trust regimen by international criminals and money-launderers. That has resulted in New Zealand becoming among the most trusted and credible offshore trust jurisdictions for pre-immigration tax planning, and why LatourLaw relies on it for investors who wish to maximize their tax savings in a fully legal and transparent way BEFORE transitioning to a new tax jurisdiction via immigration.
New Zealand foreign trusts offer a number of advantages, including protection from creditors and against laws prescribing the succession of family assets. When formed by a foreigner, a New Zealand trust isn’t subject to New Zealand tax (except on income made in New Zealand).
Moreover, there are no inheritance, wealth or capital gains taxes collected in New Zealand and unlike other jurisdictions, there is no gift duty, no stamp duty, VAT (“value added tax”)or equivalent forms of indirect taxation charged on the creation, or transfer of assets to a trust, by a non resident of New Zealand. A foreigner placing assets in a NZ trust for pre-immigration tax planning is protected from all of these.
The New Zealand trust structure offers THREE main benefits:
- Only trust income having a New Zealand source will be taxed in New Zealand. Therefore all income earned outside New Zealand (‘overseas income’) is tax-free. (Since LatourLaw has never had a client looking to invest in New Zealand, local taxation hasn’t been an issue, but we have the right local counsel in place if and when that question comes up.)
- New Zealand does not have a capital gains tax. Remember: anytime you make money that is the result of corporate profits, dividends, selling real estate at a profit, etc., the profit you yield is a “capital gain”. While not subject to income tax, capital gains tax can take a substantial chunk of these profits!
- Distributions of overseas income to non-resident beneficiaries will not be subject to New Zealand tax. This includes distributions of accumulated income. (Put simply, when the trust has money to distribute to the beneficiaries, it is not subject to any New Zealand taxes.)
A New Zealand foreign trust offers an excellent structure for settlors and beneficiaries who do not intend to live in New Zealand. Contact LatourLaw for more information on how we can help you LEGALLY pre-plan your immigration process to maximize future tax savings.