Government to make sweeping changes to foreign trusts in wake of Panama Papers

Finance Minister Bill English said the Government intends to move quickly on the changes. Photo / Mark Mitchell

Foreigners setting up tax-free trusts in New Zealand will soon have to disclose their identity and any beneficiaries, after the Government agreed to sweeping changes in the wake of the Panama Papers.

Finance Minister Bill English and Revenue Minister Michael Woodhouse said today that they had agreed to all of the recommendations in the Shewan Inquiry into foreign trusts.

The recommendations were "sensible" and "well-reasoned", English said, and by acting on them the Government would help strengthen disclosure rules and protect New Zealand's reputation.

"The changes to the foreign trust rules are a matter that the Government intends to move quickly on," he said.

The first step will be the creation of a register of foreign trusts, which police and internal affairs will be able to search.

A new requirement for trusts to make annual disclosures will come into force in the next few months.

While Government agreed with all of the recommendations, Mr Woodhouse noted that the way in which they were implemented would be "tweaked".

"We have already committed to a course of action for strengthening New Zealand's anti-money laundering rules, which will bring in more comprehensive requirements for lawyers, accountants, real estate agents and others," he said.

"For example, lawyers and accountants will be included in [anti-money laundering] requirements as soon as practicable.

"However due to issues around legal privilege and regime supervision this will form part of the more substantial [anti-money laundering] reform programme already underway, which is being expedited."

The inquiry by former PwC chairman John Shewan - which was prompted by the Panama Papers - concluded last month that the disclosure rules for New Zealand's foreign trusts were "not fit for purpose" and "light-handed".

It recommended that foreign investors should disclose much more information when setting up a trust and should file annual returns in New Zealand.

Once implemented, any foreigner who sets up, controls, or benefits from a trust based in New Zealand will have to disclose their identity, foreign address and tax details at the time of registration - a significant increase in disclosure to the existing system.