Submission PUB00345: Income Tax – distributions from foreign trusts

CA ANZ recently provided feedback on Inland Revenue’s draft interpretation statement PUB00345: Income Tax – distributions from foreign trusts which considers the income tax treatment of amounts of money or property transferred to New Zealand resident taxpaters by a person overseas, including through inheritance. 

This is a complex area of tax law and CA ANZ appreciates Inland Revenue taking steps to clarify it. We believe a practical follow up statement would be useful, in particular a fact sheet that explains in the concept of “assent” in practical terms which is critical to determining the taxation status of a payment received from oversease and may not be well understood by some taxpayers.

We recommend that the draft statement considers/explains in further detail:

• How and when the provisions of the Trusts Act will apply
• That the transition from executorship to trust may simply be a bare trust (and therefore of no tax consequence)
• When a New Zealand beneficiary may in broad terms make use of foreign tax credits for tax paid by the trust
• Changes in Inland Revenue processes resulting from Business Transformation.