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By forming a Managed Trust Company in New Zealand, a foreign financial institution or offshore trust company is able to offer New Zealand foreign trusts to its clients while retaining management of those clients’ affairs and complying fully with New Zealand law.

Why Establish a Managed Trust Company

Financial institutions and professional advisers are increasingly offering structures based in onshore jurisdictions to their clients. There are a number of such structures available, including Delaware companies, United Kingdom limited partnerships and New Zealand foreign trusts.

New Zealand foreign trusts are particularly attractive. New Zealand is a stable and conservative OECD member country. It is a common law jurisdiction with a respected judiciary, well-developed trust law, significant legal and accounting resources and an established financial infrastructure. New Zealand foreign trusts are exempt from New Zealand reporting requirements as well as from New Zealand taxes.

Different time zones and distance from the market are sometimes seen as a disadvantage, but New Zealand law has developed special structures to respond to this. One structure proving particularly attractive to financial institutions and offshore trust companies is a managed trustee company (MTC). By forming a MTC in New Zealand, a foreign financial institution is able to offer New Zealand foreign trusts to its clients while retaining management of its clients’ affairs and complying fully with New Zealand law.

Establishment and Administration

The process of establishing a MTC in New Zealand is relatively simple, quick, and inexpensive. The MTC is a normal private New Zealand company, and need not have any New Zealand resident shareholders or officers*. There is also no requirement to apply for a license to carry on business as a trustee, and there is no limit on the number of trusts a MTC can act as trustee for. Furthermore, New Zealand law permits the redomiciliation of a MTC to another jurisdiction if a New Zealand domicile becomes unsuitable at any time in the future.

Some caution does need to be taken when it comes to the administration of a MTC. There are three areas requiring special attention:

  • A New Zealand foreign trust is exempt from New Zealand taxes on any income from its business activity outside of New Zealand. While the MTC will carry out that business as a trustee, it must actually do so as a trustee and not as a private trading company. Careful attention needs to be given to operating procedures, and record keeping, particularly relating to trustee decisions and financial transactions.
  • The exemption from New Zealand tax for New Zealand foreign trusts is subject to the New Zealand taxation source rules. The source rules specify the classes of income that are to be treated as having been derived from New Zealand. The classes of income are far-reaching and include, for example, income derived from contracts made or (wholly or partly) performed in New Zealand. Therefore, careful attention must be paid to the MTC’s operation of the trust’s business and certain transactions may be best carried out in a third jurisdiction.

  • The MTC is subject to New Zealand law in all aspects of its operations:

    • A MTC is subject to normal New Zealand taxes on New Zealand resident companies. It must earn a reasonable income from its activity, file a tax return, and pay company tax on that income;

    • A MTC must comply with the various administrative provisions of the New Zealand Companies Act 1993;

    • A foreign-owned MTC will be required to lodge its audited annual accounts with the New Zealand Companies Office pursuant to the New Zealand Financial Reporting Act 1993  (this may be avoided by having a New Zealand resident nominee hold the shares of the MTC);

    • A MTC may qualify as a “financial institution” under the New Zealand Financial Transactions Reporting Act 1996, and must therefore comply with record keeping and reporting obligations under New Zealand anti-money laundering laws;

    • Various provisions of New Zealand law impute personal liability to New Zealand company directors, including sections 135 and 136 of the New Zealand Companies Act 1993; and

    • Other New Zealand law may apply to the operations of the MTC (and its client trusts), depending on the nature of the business of the trust.

It is prudent, therefore, for a financial institution or offshore trust company to enter into a “Managed Trust Company Administration Agreement” with a professional New Zealand trustee company. This will ensure the company complies fully with New Zealand law at all times and that it’s clients receive the full benefits of the New Zealand foreign trust structure.

How Can NZTIC Assist?

New Zealand Trust & Investment Corporation Ltd (NZTIC) is a professional New Zealand trustee company offering advisory and administrative services to MTCs. NZTIC’s professional staff have considerable experience in management and administration of New Zealand and companies and trusts.

A formal agreement is normally entered into between the MTC and a New Zealand professional trustee company, to provide both passive and active management services to the MTC. Such services are optional and include:

  • Registered Office
  • Statutory Company Administration
  • Accounting
  • Tax Compliance
  • Nominee Shareholder
  • Nominee Director
  • Trust Management, Administration and Accounting
  • Bank Accounts
  • Anti-Money Laundering Compliance
  • Communications Facilities