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A complying trust is one which has been taxed in New Zealand on all its trustee income since the date it began. Complying trusts include:
A trust remains a complying trust if, since settlement of the trust, the trustees have satisfied all obligations in respect of its income tax liabilities.
A trust is not a complying trust if:
If a trust ceases to meet the conditions for a complying trust in an income year, it will no longer be a complying trust - it will generally become a non-complying (formerly non-qualifying trust). For example, if the tax on a complying trust's trustee income is not paid, or if the trustees cease to be New Zealand residents.
|A trust will continue to be treated as a complying trust after the settlor migrates from New Zealand if, since that time, the trustee has continued to:
Retaining complying status
As there is no tax due on trustee income, a complying trust will not lose its complying status simply because one or more of the following apply:
A trust will be a foreign trust if none of its settlors have been resident in New Zealand since the later of these dates:
A trust will cease to be a foreign trust if it makes any distribution after a settlor becomes a New Zealand resident, or if a New Zealand resident makes a settlement on the trust.
A non-complying trust is any trust that is neither a complying trust nor a foreign trust at the time it makes a distribution. It is generally a trust that has a resident settlor, has been established overseas with non-resident trustees, and has not been liable for New Zealand income tax since it was first settled. It also includes a trust where its trustee income has been liable to full New Zealand tax but the trustees have not paid the tax.
New residents who arrive in New Zealand may have settled a trust before they arrived in this country. Such a trust would normally be a foreign trust, but it can elect to become a complying trust.
To change types, the trust must elect to pay New Zealand income tax on its trustee income within 12 months of when the settlor first arrives in New Zealand. The trustee income will then become taxable in New Zealand from the date the trust makes the election. The trust should use an Election to pay income tax on trustee income (IR463) form to make this election. You can download a copy or order one by calling our 0800 self-service line on 0800 257 773.
If the trust does not make an election, it will be treated as one of the following: