The Private Wealth & Private Client Review: New Zealand


New Zealand is a member country of the Organisation for Economic Co-operation and Development (OECD) and a member of the Commonwealth of Nations. It has a well-developed infrastructure and in 2020, New Zealand was ranked as the least corrupt country in the world in Transparency International's corruption perceptions index, sharing first place with Denmark.

It has a relatively small population for its size. It covers 268,680 square kilometres and has a coastline of 15,134 kilometres; compared with the United Kingdom, which covers 244,820 square kilometres with a coastline of 7,918 kilometres. To further the comparison, the United Kingdom has a population of 66.8 million and New Zealand 5 million. These comparisons influence many essential characteristics of the country, including a low level of regulation and stability, and being an attractive, if remote, place to live. New Zealand's significance in wealth planning arises because of its attractiveness as a migratory destination, and as a centre for international wealth and succession planning. Of particular interest are the absence of most kinds of capital gains, estate or gift taxes, and the incorporation into statutory law of a variety of structures that do not tax overseas-sourced income when utilised by non-resident persons.


There is no estate tax or inheritance tax in New Zealand. Gift tax has been abolished. As there are no capital transfers or accumulation taxes in New Zealand, there is no need to employ tax planning that takes into account capital tax protection.

The principal taxes in New Zealand are direct in nature: an across-the-board corporate rate of 28 per cent and a progressive individual rate of up to 39 per cent apply. An indirect tax is levied on the provision of goods and services and is charged at a rate of 15 per cent.

New Zealand enjoys the following beneficial features for wealth-planning purposes:

  1. it is a member of the OECD group of countries;
  2. it is a domestic tax-paying jurisdiction;
  3. it is a party to numerous double taxation treaties and taxation information exchange agreements; and
  4. it has comprehensive anti-money laundering legislation and is a founding member of the Financial Action Task Force (FATF).

i Tax treaties

New Zealand tax treaties generally follow the standard OECD model. Currently, New Zealand is party to 40 double tax agreements, which are summarised in the following table. New Zealand is also a signatory to 21 tax information exchange agreements; 19 of these are fully in force.

New Zealand is a signatory to the OECD Convention on Mutual Administrative Assistance in Tax Matters, which came into force for the purposes of New Zealand domestic law on 1 March 2014.

In June 2014, the government signed an intergovernmental agreement (based on a Model 1A type) with the United States for the implementation of the Foreign Account Tax Compliance Act.

The government implemented the OECD Common Reporting Standards (CRS) on 1 July 2017.

The CRS is a system for the automatic exchange of information between countries about the source and beneficial ownership of financial investments. New Zealand will only provide financial account information to the 97 countries that it has deemed to be reportable jurisdictions (the list is subject to change annually).

Country of residenceInterest (%)Interest paid to associated persons (%)Dividends
Copyright (cultural) royalties (%)
Australia1010Zero, 5 or 1555
Austria1010Zero or 151010
Belgium1010Zero or 151010
Canada1015Zero or 15105
Chile10 or 1510 or 15Zero or 1555
China1010Zero, 5 or 151010
Czech Republic1010Zero or 151010
Denmark1010Zero or 151010
Fiji1015 (min)Zero or 151515
Finland1010Zero or 151010
France1010Zero or 151010
Germany1010Zero or 151010
Hong Kong1010Zero, 5 or 1555
India1010Zero or 151010
Indonesia1010Zero or 151515
Ireland1010Zero or 151010
Italy1010Zero or 151010
Japan1010Zero or 1555
Republic of Korea1010Zero or 151010
Malaysia1515Zero or 151515
Mexico1010Zero or 51010
Netherlands1010Zero or 151010
Norway1010Zero or 151010
Papua New Guinea1010151010
Philippines1010Zero or 151515
Poland1010Zero or 151010
Russia1010Zero or 151010
Samoa10105 or 151010
Singapore10105 or 1555
South Africa1010Zero or 151010
Spain1010Zero or 151010
Sweden1010Zero or 151010
Switzerland1010Zero or 151010
Taiwan1010Zero or 151010
Thailand10 or 1510 or 15 (max) Zero or 1510 or 1510
Turkey10 or 1510 or 15 (max) Zero, 5 or 151010
United Arab Emirates1010Zero or 151010
United Kingdom1010Zero or 151010
United States1010Zero, 5 or 1555
Vietnam10105 or 151010
Other countries1515 (min)3015 (min)15

ii Liability for tax in New Zealand

New Zealand tax residents are taxed on their worldwide income. An individual is resident for tax purposes if he or she has a permanent place of abode in New Zealand or is personally present in New Zealand for one or more periods exceeding 183 days in the aggregate of any 12-month period. The income of non-residents is also subject to income tax if it is derived from a New Zealand source, although the operation of a double tax agreement may limit liability. Employment income is taxable on a gross basis and no deductions are permitted for expenditure incurred in deriving employment income. Employers withhold tax from salary and wage payments under the pay as you earn system. Self-employed individuals pay tax on a net basis and are allowed deductions for expenditure incurred to obtain their income. As mentioned, there is no capital gains tax in New Zealand; however, care must be taken not to buy and sell property within a short period of time or in such a way that a pattern of regular trading activity is established, thereby making any gains taxable under the residential land withholding tax regime or as business income.

iii Overseas income

In New Zealand, an investment that produces overseas income is called a foreign investment fund (FIF). There are three broad categories of FIFs: foreign companies, foreign superannuation schemes and foreign life assurance policies. FIF income is taxed as it accrues, not on distribution to the owner of the FIF. The FIF rules do not apply where an individual has total FIF interests worth less than NZ$50,000 in a particular tax year.

Controlled foreign companies (CFCs) are a subset of FIFs. A CFC is a foreign company that is controlled by five or fewer New Zealand residents (there are various de facto tests for control, and the basic de jure standard is that a holding of greater than 50 per cent of the shares on issue will be deemed to be a controlling interest), or that is at least 40 per cent owned by a single New Zealand resident, where no one foreign resident has a higher individual holding. The FIF rules do not apply to interest of 10 per cent or greater in a CFC. In such cases, the CFC rules come into play.

There are seven methods of calculating FIF income, one of which must be applied to calculate the income of the holder of an assessable FIF interest (i.e., one that is worth NZ$50,000 or more in the tax year in question, and is not subject to the CFC rules). The relevant methods are:

  1. the attributable FIF income method;
  2. the comparative value method;
  3. the deemed rate of return method;
  4. the fair dividend rate method;
  5. the cost method;
  6. the branch equivalent method (not available for income years beginning on or after 1 July 2011); and
  7. the accounting profits method (not available for income years beginning on or after 1 July 2011).

There is a consistency rule that requires a person to use the same income calculation method if the person has two or more attributing FIF interests.

The different methods are complex, and advice must be taken before determining which method of calculation is to be used. However, in a broad sense the calculations will be made on the basis of reference to the gains or losses overall and not to income derived or distributed. When insufficient information is available to calculate income derived precisely, a deemed rate of return is applied.

An active income exemption applies generally to all interests of 10 per cent or greater in a foreign company. This exemption comes into effect where the active business income test is satisfied. If 95 per cent or more of the income of the CFC or FIF in question is derived from an active business enterprise (as opposed to passive sources of income such as interest, dividends and royalties), then there will be no attribution of income to the New Zealand-resident holder of that FIF or CFC interest, irrespective of the fact that it might otherwise be considered to be an attributing interest.

Dividends paid to resident persons by foreign companies are generally exempt from tax in New Zealand. Foreign dividend income will, however, be assessable in the hands of a resident individual if the attributable FIF income method is used, or if the individual is subject to an exemption from the FIF rules (including the scenario where the CFC rules apply). Resident companies will be taxed on their foreign dividend income only where the dividend is paid on fixed-rate shares, or where a deduction is granted in respect of the dividend in the jurisdiction of tax residency of the foreign company paying the dividend.

iv Credits for tax paid in another jurisdiction

New Zealand taxpayers may claim credits for tax paid in other jurisdictions, even where there is no double tax agreement in place. For the credit to apply, the tax in question must be of substantially the same nature as New Zealand income tax.


i Intestacy rules

New Zealand's intestacy rules are regulated by the Administration Act 1969. The property of the intestate deceased is vested in the Public Trustee, and devolves according to the provisions of the Act: in the first instance, to any surviving spouse, children or dependants; in their absence, to the parents of the intestate; failing which, the brothers and sisters of the deceased inherit in equal shares. If there are no brothers or sisters, then the property passes first to the grandparents, and in their absence, to the uncles or aunts of the intestate. In the event that none of the heirs identified by the Act are in existence, then the assets are deemed to be bona vacantia, and pass to the government.

ii Wills

New Zealand's domestic law of wills is based on the English model, as is the underlying principle of complete freedom of testamentary disposition. A person must be 18 years of age before he or she can make a will. A will is subject to certain formalities in wording and in witnessing. A will must be in writing and generally be in a specific format, and words of formality are required. There must be at least two witnesses who are in the presence of the person who makes the will and those persons must subscribe their full names, addresses and occupations. Each page of the will must be signed by the testator and also by the witnesses.

iii Forced heirship

New Zealand recognises the principle of testamentary freedom, and therefore does not have a forced heirship regime. There are, however, several important exceptions to the principle of testamentary freedom. In addition to the standard common law avenues that may be pursued to challenge the validity of a will (lack of testamentary capacity, duress, etc.), there are two statutory mechanisms that allow for courts to intervene and alter the division of an estate as stipulated in the relevant testamentary instrument. The Law Reform (Testamentary Promises) Act 1949 provides for the recognition of promises made by a testator during his or her lifetime to make provision for a person in his or her will, and the satisfaction of that promise from the estate where no provision has been made for the person in question. The Family Protection Act 1955 allows the court to make orders mandating departure from the disposition of assets stipulated in a will where inadequate provision has been made for persons to whom the testator owed a moral obligation of financial support.

Forced heirship planning

New Zealand may be a useful planning jurisdiction in relation to countries that do have forced heirship regimes. Because of the primacy of the doctrine of testamentary freedom, New Zealand law does not recognise the concept of forced heirship. Consequently, there is no corresponding legal category into which a foreign court order based on that concept could be translated. Even in the case where one of the statutory mechanisms for the recognition of foreign judgments, such as those available under the Reciprocal Enforcement of Judgments Act 1934, exists, it would be difficult to sustain an action for the enforcement of a foreign judgment, as the New Zealand-resident respondent would usually hold the assets at issue pursuant to some kind of trust.

iv Asset protection planning

New Zealand has no specific asset protection law. However, the laws that cover insolvency and liquidation can effectively provide an asset protection structure.

v Use of trusts

The Trusts Act 2019 (Trusts Act) came into force on 30 January 2021. It aims to modernise the law by replacing the archaic Trustee Act 1956. There are some unique features of New Zealand trust law that the Trusts Act adds or builds upon, including the ability to have special trust advisers, investment advisers and managers with wide discretionary powers, and the ability to add and remove beneficiaries. A protector or investment manager, who again need not be a New Zealand resident, can be given relevant advisory and discretionary powers. New Zealand is not a signatory to the Hague Convention on the Law Applicable to Trusts and on their Recognition, and some aspects of New Zealand trust law are not compatible with this Convention. New Zealand trusts currently have a maximum trust period of 125 years.

vi Marital property rights

Marital property, known in New Zealand as relationship property, is regulated by the Property (Relationships) Act 1976. Relationship property claims may be brought by persons who are married or persons who have lived in a permanent relationship. There is no difference whether the relationship is a homosexual or heterosexual relationship. Broadly, all property obtained during the relationship is divided equally. In respect of property that is brought into the relationship, an assessment will be made of any contributions the other party has made to the property after it was introduced.

vii Divorce

Divorce in New Zealand is known as dissolution of marriage. In New Zealand, divorce may be obtained on a no-fault basis on grounds of separation for two years. Dissolution of marriage may be obtained by the parties without recourse to legal counsel. An application for dissolution may be made unilaterally or jointly by the parties.

viii Adoption

Under New Zealand law, adoption must be approved by the family court and may be carried out by any persons over 20 years of age. Adopted children enjoy the same succession rights as any biological children of the adopted family.

ix Life insurance strategies

Except in a business context, premiums paid for insurance policies are not tax-deductible in New Zealand. There are, therefore, limited opportunities for insurance planning. In general, the tax treatment of insurance payments in New Zealand depends on what the payment is compensating; insurance for loss of capital assets is non-taxable, but income-replacement insurance may be taxed. Therefore, the receipt of a death benefit will generally be non-taxable.

x Business succession

Most New Zealand businesses are held in partnership or in closely held private companies. Company constitutions and partnership agreements almost always contain provisions that provide for business succession between shareholders. Commonly, these set out a mode of pre-emption on a notice of sale or the death of a partner or equity owner, which enable that person's share to be valued and disposed of to the continuing owners. Regardless of whether there are such provisions contained in the rules of the holding entity, in conventional family companies the interest of the outgoing shareholder or partner is valued and the acquisition price for that share is fixed as a debt repayable upon demand, in some cases carrying interest. In the case where the debt is owing to an individual, this debt is often forgiven on that debtor's death by will. An alternative method of disposition of business succession is via a trust. The shares or participation in the company or partnership are held by a trustee, who may distribute those shares to a family member or members at dates agreed on or fixed by the settlor or other members of the family.

xi Use of offshore companies

Offshore companies have not featured prominently in New Zealand-based planning strategies for some time because of the introduction of New Zealand's CFC and FIF rules in the late 1980s and early 1990s. Where offshore companies are utilised, they are generally held by overseas entities such as foreign trustees, individuals or foundations. It remains to be seen whether the changes made to New Zealand's international tax regime during recent years will result in a resurgence of the use of offshore companies held directly by New Zealand entities.

xii Pre-immigration planning

Pre-immigration planning usually involves the establishment of trusts or foreign companies, or both. It is unwise for a New Zealand resident to be holding substantial investment assets outside New Zealand because of the adverse tax and other planning and reporting rules within New Zealand. Failure to plan will reduce flexibility in the future should the individual or members of his or her family wish to leave New Zealand. Therefore, any gifts or transfers of property should be made before a potential donor becomes tax-resident or domiciled in New Zealand. Ideally, a family management company should be established outside New Zealand, which will hold the assets to be invested and managed overseas. This company should be owned and controlled by a foreign trustee under a foreign trust to avoid any CFC issues or domestic tax issues in New Zealand. Capital and income that are to be utilised to settle the family in New Zealand and provide the family with a reasonable standard of living should be repatriated to New Zealand and maintained in a separate domestic structure. The overseas structure should be used to enhance and develop the family's long-term investment wealth, with resort to such funds being used for New Zealand purposes only in exceptional cases.

xiii Post-immigration planning

Provided a New Zealand resident has been absent from New Zealand for more than 10 years, he or she may obtain the benefit of the transitional residence rules upon re-establishing residence in New Zealand. Those rules exempt a person who is to become a resident in New Zealand from taxation of all income, except that derived from active business enterprises in New Zealand, and the provision of services overseas, for a period of 48 months from the date of establishing tax residency. Accordingly, a returning resident may safely plan to return to New Zealand and, before the expiry of the relevant period, leave New Zealand for another jurisdiction. Alternatively, he or she may utilise the transitional period to set up legitimate overseas structures that will reduce future New Zealand taxation liability.

xiv Mobility planning: general

New Zealand tax residency is lost after spending more than 325 days in any 12-month period outside the country; however, the maintenance of enduring ties with New Zealand, in particular the retention of a permanent place of abode, may result in tax residency being deemed to have continued. Once tax residency has been lost, the expatriated person will only be liable to tax on income derived from a New Zealand source.

xv Mobility planning: trailing residency or domicile

Expatriation from New Zealand for tax purposes is achieved by losing tax residency. There are no significant departure issues in New Zealand.

xvi Exit or expatriation tax

There are no expatriation rules or penalties in New Zealand.

Wealth structuring and regulation

i Trusts

New Zealand trust law is derived from English trust law. For a variety of fiscal reasons, the trust is commonplace in New Zealand. New Zealand trust jurisprudence is robust and well understood by lawyers, judges and accountants.

The New Zealand foreign trust has been a part of New Zealand's legislative framework since 16 December 1988. It is a simple and logical structure, the result of a deliberate policy of the government. The New Zealand exempt trust offers non-residents of New Zealand all the advantages of a conventional tax-free structure within a well-regulated jurisdiction. Features of a New Zealand foreign trust are as follows:

  1. a trustee holds the trust assets for the persons described in the trust deed as beneficiaries;
  2. a trust deed describes an equitable and contractual relationship between persons, which is regulated only by the courts;
  3. the trust is registered with the New Zealand Inland Revenue Department (information is not publicly available);
  4. a trustee may be a natural person, company or a limited partnership. The trust may have any number of trustees;
  5. a New Zealand trust may hold property, and trade or operate a business;
  6. a custodial or principal trustee must be a New Zealand resident to be trustee of an exempt trust;
  7. a trust can be terminated at any time; and
  8. the trust may operate for a maximum of 125 years.

Trusts occupy a particularly favourable position in the New Zealand tax regime. Provided that the assets of the trust are contributed by a non-resident settlor, and none of the trust property consists of New Zealand-situated assets, then, in the vast majority of cases, the income derived from the holding of those assets can be received by the New Zealand-resident trustee, and distributed to non-resident beneficiaries, without any liability to tax arising in New Zealand.

Apart from the income tax applied when a property is sold within a certain period and the residential land withholding tax that applies to non-residents or entities controlled by non-residents who purchase residential property located in New Zealand, there is no capital gains tax in New Zealand. Any capital increase in the value of the trust's assets is, therefore, not taxable.

ii Limited partnership

Limited partnerships were introduced into New Zealand law by legislation enacted in March 2008. A limited partnership comprises at least one limited partner, and a general partner who is the manager of the limited partnership. The limited partner may not, subject to minor exceptions, take part in any management activity. In return, the limited partner enjoys the protection of limited liability in respect of the debts and liabilities of the partnership. The partners may be natural or legal persons and need not be New Zealand residents. However, requirements that a partnership should have at least one general partner that is either a New Zealand incorporated company, a New Zealand resident person or a New Zealand unlimited partnership came into effect on 1 September 2014. The partners may or may not have a participation in the capital of the limited partnership, although the limited partner would usually be granted an equity interest in the partnership in return for contributing the capital used to establish the partnership.

A limited partnership, as distinct from a general partnership, is treated in New Zealand as having a separate legal personality. It is registered in the same way as a company with the New Zealand Companies Registry. The public information in the Companies Registry comprises the name of the limited partnership, details of its registered office and the identity of the general partner. The identity of the limited partner is protected as confidential information in terms of the legislation. The partnership agreement is a private document and is not registered in the Companies Office.

Limited partnerships are transparent for tax purposes. In other words, in determining their liabilities under the Income Tax Act, the Inland Revenue Department of New Zealand will attribute the partnership's income, expenses, tax credits, rebates, gains and losses to the underlying partners in proportion to their partnership interests.

The limited partnership can be particularly useful in offshore wealth planning. The partnership will generally be recognised as a separate legal entity under foreign law, and therefore can be useful in mitigating the problems associated with the lack of recognition of trusts in certain jurisdictions. A foreign trust could act as the limited partner of the partnership, with 100 per cent of the partnership interests being held by the trust. The income generated by the partnership assets would therefore flow through to the trust in its entirety and would be eligible for all of the benefits enjoyed by foreign trusts under New Zealand law. The identity of the limited partner would also be confidential and could only be disclosed in a limited number of circumstances.

iii Foreign investment Zero-rate portfolio investment entities

New rules have been introduced for the taxation of collective investment vehicles resident in New Zealand, or portfolio investment entities (PIEs). These rules are aimed at making New Zealand more attractive as a jurisdiction for funds administration.

The major problem with the taxation of PIEs under the previous regime was that foreign-resident investors in PIEs were taxed fully on the income attributed to them, irrespective of the fact that the PIE may have derived that income entirely from sources outside New Zealand. This was in contradiction to the basic policy of the New Zealand tax base that non-residents should only be taxed on New Zealand-sourced income.

The new rules provide the opportunity for a PIE to elect to be treated as a foreign investor Zero-rated (FIZR) PIE (for tax purposes), which allows foreign investors to be taxed at a rate of Zero per cent on the foreign-sourced income they derive through the FIZR structure.

An entity must meet the general criteria for becoming a PIE before it can elect to be treated as an FIZR. In very simple terms, the general criteria are:

  1. the entity must make investments on behalf of one or more investor classes, one of which must not have less than 20 members, and none may own or control 20 per cent or more of the interests in that investor class;
  2. the entity, which may be a company or a unit trust, must be resident in New Zealand; and
  3. the holdings of the entity must comprise at least 90 per cent passive income-
    generating assets.

The New Zealand administrator of the PIE will be either a New Zealand trustee or the directors of a PIE company. In the case of a company, it is suggested that a separate company administrator be appointed.

If it is treated as an FIZR for tax purposes, the PIE may attribute its income to its investors at a rate of Zero per cent if the following two conditions are fulfilled: the income of the entity is entirely foreign-sourced; and the investors are notified foreign investors (NFIs).

NFIs are non-New Zealand-resident investors. They may be natural persons, or any other legal entity, including a New Zealand exempt trust. The NFI must provide the FIZR PIE with the personal information of the NFI, which will be held by the administrator of the FIZR PIE. The NFI must also certify that it is a recommended investor.

The PIE must file a tax return each year and prepare accounts. These accounts need not be audited or publicly filed.

iv New Zealand's anti-money laundering regime

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML Act) was fully implemented on 30 June 2013 and imposes several obligations on reporting entities. In September 2017, the AML Act was amended to extend the core obligations of reporting entities to real estate agents, lawyers, accountants, conveyancers, the New Zealand Racing Board and some high-value dealers. It also established the Department of Internal Affairs as the relevant anti-money laundering supervisor for those entities. Entities that fall within the definition of reporting entities need to take the following steps to be compliant:

  1. prepare a written risk assessment of the money laundering and financing of terrorism that could be expected in the course of business;
  2. establish and maintain an anti-money laundering and counter-terrorist financing programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism;
  3. appoint a compliance officer to administer and maintain the programme (above);
  4. perform customer due diligence processes based on the risk assessment, including customer identification and identity verification;
  5. perform suspicious activity reporting, prescribed transaction reporting, auditing and annual reporting of systems and processes; and
  6. keep records of all the above for a period of no less than five years.

The AML Act takes a risk-based approach to compliance. Reporting entities (within the limits set by the AML Act and its regulations) have some flexibility to determine the way in which they meet their obligations based on their risk assessment.

There are several supervisory bodies that regulate the application of the AML Act: the Financial Markets Authority, the Reserve Bank of New Zealand and the Department of Internal Affairs.

Outlook and conclusions

As previously mentioned, New Zealand has a lightly regulated economy. In 2010, tax reforms were passed that made its taxation system simpler, as well as reducing income tax rates. This has resulted in an increase in high-net-worth families and individuals moving to New Zealand.

New Zealand has also been overhauling its financial advisory system. Recent financial market reforms include changes to the regulation of capital raisings, and to how financial products and services are created, promoted and sold.

As a founding member of both bodies, New Zealand is fully compliant with FATF and OECD standards and is known as a transparent and safe jurisdiction. This includes recent reforms that have served to enhance New Zealand's reputation as a safe, politically and economically stable country within which wealth can be protected for future generations.

New Zealand has replaced its Trustee Act 1956 with a modern, coherent and useful statute, as considered in the body of this chapter. The new Trusts Act takes the most fundamental trust law principles from the common law and puts them into accessible legislation for all to understand. It does not codify all trust law but recognises the complexity, nuances and desire for continued development through case law.

The New Zealand Law Commission has proposed changes to various succession laws and has received public feedback on its issues paper. It expects to report back to the government by end of 2021.

As the taxation system in New Zealand is simple, and the economy is rebounding and forecast to runs a surplus, there is no foreseeable need to change the tax system for fiscal reasons. New Zealand has a voluntary taxation system, and the absence of wealth and most capital taxes makes it an attractive place to live and invest.


1 Geoffrey Cone is the founding partner and Claudia Shan is a partner at law firm, Cone Marshall Limited. The writers would like to acknowledge the assistance of Leping Zhang, associate.

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