HC 10 Complying trusts
Requirements for complying trusts

(1)

A trust is a complying trust in relation to a distribution if—

(a)

the following requirements are met for the life of the trust up to the time of distribution:

(i)

no trustee income derived includes an amount of non-resident passive income, or non-residents’ foreign-sourced income, or exempt income under section CW 54 (Foreign-sourced amounts derived by trustees); and

(ii)

the tax obligations relating to the trustee’s income tax liability have been satisfied for every tax year; or

(ab)

the following requirements are met:

(i)

a person makes an election under section HC 33; and

(ii)

for the life of the trust up to the time of distribution, the tax obligations relating to the trustee’s income tax liability for the trustee income are satisfied for each tax year; or

(b)

it is a superannuation fund.

Foreign trust choosing to become complying trust

(2)

A foreign trust may become a complying trust to the extent set out in section HC 30 by—

(a)

an election being made under section HC 30(2)

(i)

before the time of distribution; and

(ii)

within 12 months of the date on which the settlor referred to in section HC 30(1) becomes resident in New Zealand; and

(b)

the requirements of subsection (1)(a) are met for trustee income derived after the election date.

Life of trust

(3)

The life of the trust referred to in subsection (1)(a) and (ab) includes every income year from the start of the income year in which a settlement was first made on the trust up to the time of the distribution.

Complying trusts: meeting requirements

(4)

For the purposes of subsection (1)(a) and (ab), section HC 29(6) does not apply in determining whether the requirements are met.

Defined in this Act: amount, complying trust, distribution, exempt income, foreign-sourced amount, foreign trust, income tax liability, income year, non-resident passive income, non-residents’ foreign-sourced income, resident in New Zealand, settlement, settlor, superannuation fund, tax year, trustee, trustee income

Compare: 2004 No 35 ss HH 2(2), HH 4(5) proviso, OB 1 “foreign trust”, “qualifying trust”

Section HC 10(1)(ab): inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 24 February 2016, by section 185(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section HC 10(3): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 24 February 2016, by section 185(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section HC 10(4): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 24 February 2016, by section 185(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).