ANALYSIS: The flood of information on tax havens contained in the so-called Panama Papers has thrown the spotlight on New Zealand's little known but flourishing role as a "home" to trusts for foreign residents.
Few would have known New Zealand was hosting more than 11,000 of these trusts, or that they earn the country as much as $50 million in professional fees.
But what are the trusts, who has them, and are we a tax haven or safe haven?
What is a New Zealand based overseas trust?
It's a legal structure to hold assets - money, shares, land, gold bars, paintings, even a stamp or wine collection. The person/s putting the assets into the trust and the beneficiaries are overseas residents.
Trusts are a long established means of organising and protecting financial assets and wealth. The New Zealand approach has come out of British law and is broadly similar to that which applies in other countries such as the UK and Australia.
The current trust system was set up in the mid-1980s when New Zealand deregulated and freed up much of its financial sector.
The trusts have a local agent, usually an accountant or lawyer, who acts as the New Zealand office.
It's relatively easy to do so. A quick web search will throw up scores of New Zealand firms offering their expertise.
Why are they set up in New Zealand?
New Zealand's international standing as a reputable country with a stable political system, and independent and established legal and financial systems, are offered as the main selling points by local firms.
The trusts are marketed as offering high degrees of asset protection, discretion and flexibility, along with their tax free status.
The overseas interests controlling the trust can buy and sell assets and make investments, and as long as the business deals are all done overseas then the resulting gains will not be taxed in New Zealand.
Who keeps an eye on the trusts?
Inland Revenue (IRD) has oversight of the trusts, which are required to be registered. The trusts are not required to file an annual return, but if asked by IRD they must give details on their make up and transactions.
Why are they not taxed in New Zealand?
The approach is that if it the trusts don't do business and don't earn money in New Zealand then they shouldn't pay tax.
So payouts made by New Zealand based offshore trusts - of foreign sourced income or foreign sourced capital gains to its foreign resident beneficiaries - will generally attract no income tax, capital gains tax, gift or estate duty.
Do we share information on the trusts with any other countries?
Countries with whom New Zealand has a double taxation treaty, an information sharing agreement, or is a signatory to the OECD tax information sharing agreement, will be given information if they ask.
There is one notable exception. IRD automatically passes on information to Australian tax authorities of anyone from there using such trusts to manage their assets.
In November 2014, IRD sent a paper to the government on trusts and broader international tax issues. No action was taken because of the workload on the department.
Can New Zealanders be part of such trusts?
Yes, but if they are a beneficiary then the income they get from such tax will be taxed at New Zealand rates.