Section HC 30 — Income Tax Act 2007: Treatment of foreign trusts when settlor becomes resident

HC 30 Treatment of foreign trusts when settlor becomes resident What this section applies to (1) This section applies for the purposes of section HC 15 and the definition of taxable distribution when— (a) a settlor of a trust is a natural person who on a day (the transition date )— (i) becomes resident in New Zealand and is not a transitional resident: (ii) stops being a transitional resident and continues to be a New Zealand resident; and (b) the trust would be a foreign trust in relation to a distribution if a distribution were made immediately before the settlor became resident. Choosing to satisfy tax liability (2) A settlor, trustee, or beneficiary of the trust may choose to satisfy the income tax liability of the trustee under section HC 33 . They must make the election by the election expiry date. Tax consequences of making election (3) If an election under subsection (2) is made, the trust is treated as follows: (a) as a foreign trust to the extent to which the distribution consists of an amount derived by the trustee before the date of the election: (b) as a complying trust to the extent to which the distribution consists of an amount derived by the trustee on or after the date on which the election is made, if the requirements of section HC 10(1)(a) are met for the trustee income derived after the date of the election: (c) as a non-complying trust if the election is made but the requirements of section HC 10(1)(a) are not met, for any distribution not within paragraph (a). Tax consequences when no election made (4) If an election under subsection (2) is not made, the trust is treated as follows: (a) as a foreign trust to the extent to which the distribution consists of an amount derived by the trustee before the date of the election: (b) as a non-complying trust to the extent to which a distribution consists of an amount derived by the trustee on or after the election expiry date. Election expiry date (5) In this section, the election expiry date is the day that is the first anniversary of the transition date. Calculating income derived before election or election expiry date (6) For the purposes of subsections (3) and (4), the amount derived in the part of the income year before the person makes the election, or before the election expiry date, as applicable, is at the option of the person either— (a) the amount actually derived in the part year; or (b) an amount calculated using the formula— amount derived in income year of election × days before election date or election expiry date 365. Defined in this Act: amount , complying trust , distribution , election expiry date , foreign trust , income tax liability , income year , non-complying trust , resident in New Zealand , settlor , taxable distribution , transitional resident , trustee , Compare: 2004 No 35 s HH 2