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New Zealand's Tax Treaties
The New Zealand Government has entered into tax treaties
with the governments of 28 other countries. These are:
| Australia (1995) |
Korea (1983) |
| Belgium (1983) |
Malaysia (1976) |
| Canada (1981) |
Netherlands (1981) |
| China (1986) |
Norway (1983) |
| Denmark (1981) |
Philippines (1980) |
| Fiji (1977) |
Russian Federation (2001) |
| Finland (1984) |
Singapore (1973) |
| France (1981) |
South Africa (2002) |
| Germany (1980) |
Sweden (1980) |
| India (1986) |
Switzerland (1981) |
| Indonesia (1988) |
Taiwan (1997) |
| Ireland (1988) |
Thailand (1998) |
| Italy (1983) |
United Kingdom (1984) |
| Japan (1963) |
United States of America (1983). |
Tax Treaties and the New Zealand Foreign
Trust
Residence
As outlined in the section on Foreign Trusts, any non-New
Zealand sourced income of a Foreign Trust is exempt from New
Zealand taxation, whether that income is accumulated or is
distributed to non-New Zealand resident beneficiaries. In
addition, a Foreign Trust may also qualify for benefits under
New Zealand's tax treaties.
An entity can obtain the benefits under most New Zealand
tax treaties if it is resident in New Zealand. For most treaties
an entity is resident in New Zealand if it is "liable
to tax therein" by reason of residence. For New Zealand
purposes, it is normally the trustee who must be liable to
tax, rather than the trust.
While the trustee is not liable to tax on foreign-sourced
income, it remains liable to tax in New Zealand on, for example,
New Zealand-sourced income. Thus, there is a strong argument
that the trustee is resident in New Zealand and is thus entitled
to the benefits under most New Zealand tax treaties.
Beneficial Ownership
Most New Zealand tax treaties provide for a limitation or
elimination of foreign withholding taxes on dividends, interest
or royalties. However, to obtain these benefits it must be
established that the New Zealand resident trustee is the beneficial
owner of the dividends, interest or royalties.
There are strong arguments for a number of New Zealand's
tax treaties that a trustee of a discretionary Foreign Trust
can be treated as the beneficial owner of the dividends, interest
or royalties, and as such can obtain the benefit of reduced
withholding rates under tax treaties.
Capital Gains
A number of New Zealand tax treaties prevent the proceeds
of alienation of property being taxed in both jurisdictions.
For example, where a New Zealand Foreign Trust disposes of
eligible property in the United Kingdom, the capital gain
on the sale will not be subject to tax in the United Kingdom.
The capital gain will also not be subject to New Zealand
tax as New Zealand generally does not tax capital gains, and,
New Zealand would not tax the trustee as the gains would be
foreign-sourced income of a Foreign Trust.
How Can NZTIC Assist?
In conjunction with its legal advisors, NZTIC has carried
out a detailed analysis of New Zealand's tax treaties with
the more significant jurisdictions. NZTIC can assist in identifying
potential uses of these treaties and appropriate structures
for clients. It is important to note that all treaties are
not identical and professional advice is recommended.
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