Foreign Trust Distributions

IR has released PUB00345, which is a draft interpretation statement which considers the income tax treatment of amounts of money/property transferred to NZ resident taxpayers by a person overseas, including through inheritance, how to then address determining the character of the transferor and in this regard, the scenarios when a taxpayer will be seen to have derived either beneficiary income or a taxable distribution from a foreign trust.

The key items discussed by the draft statement, include how to determine if the amounts of money/property will be deemed to have come from a trust (defined purely from a NZ law perspective regardless of how the overseas jurisdiction may characterise the arrangement

between the parties, the character of the trust itself once one has been deemed to exist (with the focus on foreign trusts for the purpose of this ruling), and upon a foreign trust definition having been satisfied, whether the distribution will then be considered to be either beneficiary income or a taxable distribution, with either categorisation then having NZ income tax consequences for the NZ resident beneficiary.

The deadline for comment on PUB00345 is 10th September 2019.

A Week in Review originally published; Monday 12th August 2019.

If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected]. 

If you would like to receive these updates directly to your mail inbox, you can subscribe by clicking here.