Setting Up A New Zealand Charitable Trust For Income Strategy
Most of the influential leaders in the world, both in business and politics, have established and chaired charity type organizations that can help them shape the world in fields like education and the environment. Some of the more famous and influential of these leaders in America include Bill Gates. The Bill and Melinda Gates Foundation was the organization he created with his wife to improve the world, making it one of the largest charitable organizations in the world.
“Philanthrocapitalism” is a form of sustainable capitalism and was created as a result of an influx of American businessmen who decided to follow Gates’ lead and formed their own charitable institutions to help humanity. Start your own here> Click here.
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An old saying from the Native American Cree states that “when all the fish are gone, when the waters are polluted, when the air can no longer be breathed, then only will you understand that money cannot be eaten”.
Sustainable capitalism utilizes alternative energies for mankind. This helps with the discovery of unlimited food supplies and eternal energy systems, as well as other similar items. Capitalism that is rooted in tradition, does not care to invest in these items that have limitless potential. Someone once said to Nikola Tesla, “why should I invest in solar energy when it can be obtained for free by the sun?”
A similar sentiment came from Mikhail Gorbachev, who created a powerful foundation with the intention of using environmental principles for a new global economy. The potential of his charitable organization, in regards to the political and economic aspects, can be summarized by the following:
“His intentions for the future are to manipulate the people of the world into accepting a single world government under the pretense of preserving the environment. The Green Cross, the name of this global foundation, has the “Earth Charter”, which he is hopeful will rival the Ten Commandments. Under the guise of charity, he wants to restructure the economy, the political system, and religious views.”
It is not a terribly far-fetched fear that these type of global entities will become more powerful and influential than most governments, such as the East India Trading Company had. It is possible that new economic and political forces are able to emerge as philanthropic or charitable foundations or trusts. For proof of this, the Catholic Church, a philocapitalistic institution that was well ahead of its time, is tax exempt but has its own land and a fortune to its name.
While world leaders are continually raising the tax burden on people and businesses, they are also creating new taxes to get more money. Even still, there is one available structure in New Zealand law that is tax-free and exists perpetually. So now, we will look closer at the legal position and requirements of these charitable trusts.
Register a New Zealand Charitable Trust:
A non-resident can register a New Zealand charitable trust easily from aboard, as long as it operates for a charitable purpose outside of New Zealand. If it has a charitable intent, it would be legally filed as a “non-resident charitable trust”. There are some advantages of doing this:
- The charitable trust can do everything a corporation can do, such as conduct business and own property. For instance, trusts are able to own universities and other schools.
- As long as the business operated by the trust does not exist in New Zealand, it does not have to pay any taxes in New Zealand.
- Either the founders of the trust or the board of trustees can control the trust.
- As long as the investments are not in New Zealand, the trust is able to get grants and donations from donors from anywhere across the globe and invest this money tax-free.
- As long as the income is a result of their activities as trustees, the trustee can obtain as much personal income as they want from the trust. They can also use assets of the trust such as homes and automobiles etc.
Here is an example:
If a perpetual trust was created to run a university, that university will be created as a perpetual charitable organization for advancing education. This means that founders are able to lend money to the trust for creation if they want. Then the founders will appoint themselves or other people as trustees. After this, they are able to pay themselves whatever salary bonuses that they wish.
From there, they run the university and gain fees, donations, and other funds that they are in full control of. With these funds, they are not only able to pay their own salaries, but they can also purchase their own homes, cars, and other assets. The trustees remain trustees for life, and have the ability to appoint friends and family members as trustees.
As a result of these favorable aspects, more businesses are being formed as charitable foundations or trust structures.
Another advantage of these charitable trusts is that it is a legitimate and open legal mechanism that is allowed by most governments. For instance, in most locations laws forbid politicians to have offshore accounts, but they are legally able to be appointed as trustees of charitable trusts. This is also a great way for a politician to create a positive public image because people will see they are on the board of a charitable trust and it makes the politician look like they really care.
Essentially, a charitable institution may be likened to a political party in many aspects, including the option to use funds for any manner that it wants, as long as it can advance the goals of the party. It is a prestigious honor for politicians to be appointed to the board of a charitable institution.
Here is a look at extra steps that are required to register a charity under the New Zealand Charitable Trusts Act:
Goals of the Charitable Trusts Act
By having been registered with the charities commission, New Zealand will then officially recognize that charity. This commission is careful to analyze these applications to make sure that it falls within the definition of a charity. When applying as a non-resident, that charity can take donations from citizens of New Zealand and from people worldwide in addition to having the tax exemption even if the charity is domiciled in New Zealand.
However, to be considered a charity, they must fall within the common law definition of what a charity is. As a result of its English roots, New Zealand’s legislation comes from the Statute of Elizabeth.
The Charitable Uses Act of 1601, also known as the Statute of Elizabeth, was passed in order to prevent trusts from misusing charitable funds. This is the preamble, which contains the list of what was considered as charitable at that time:
- Assisting the aged, the impotent, and the poor
- Maintaining the sick and injured mariners and soldiers.
- Free schools and university scholars
- For the use of repairing ports, bridges, havens, sea banks, churches, causeways, and highways
- For the use of educating and the preferment of orphans
- Used for the maintenance, relief, and stock of houses of correction
- To assist the poor maids in their marriage.
- To support and assist young men involved in trades and handicrafts, persons decayed, and tradesmen.
- To relieve and redeem captives and prisoners
- Assist or ease any, setting out of soldiers, poor inhabitants concerning payments of fifteens as well as other taxes.
S38 defining the term “charitable purpose” in this part:
Unless otherwise stated, the term “charitable purpose” means every purpose that is in accordance with the New Zealand law that is charitable; including the following whether or not they have any benefit to any part of the community or the entire community.
- Supplying physical wants of the sick, destitute, aged, poor, or otherwise helpless persons, as well as the expense of funeral services for the poor
- Educating the poor or indigent or their children
- Reforming offenders, drug addicts, prostitutes and drunkards
- The care and employment of discharged offenders
- Provision of religious instruction, regardless of general or denominational
- Supporting libraries, reading rooms, lecturing, and classroom instructions
- To promote athletics and wholesome amusements and recreations
- Contributing to losses by fire and other accidents
- To encourage skill, thrift, and industry
- Rewarding for acts of courage and self-sacrifice
These courts have considered if the new purpose is similar to a previous purpose accepted as charitable and if it satisfies the requirement of benefiting the public.
The courts have found these below to be “beneficial to the community”:
- Promote public health, such as offering counseling, education, and rehabilitation services
- Promote public works and services, like building roads.
- Offering public works and services
- Offering public amenities and recreational areas
- Protecting the environment
- Helping to protect human life
- To prevent cruelty, and protecting the welfare of animals
- Integrating people back into the community
- To promote a more efficient armed forces
- Potential beneficiaries must consist of a big enough group of the community
- The trust must provide benefits to society
Another possible important issue concerns questions of incorporation as a Charitable Trust Board. The Charitable Trust Act of 1957 has a provision for registration as a Charitable Trust Board. The key point is that the assets owned by the trust will not need to be transferred into new legal ownership each time the trustees have a change of board members. This board is its own legal entity.
A charitable trust is able to be registered by non-residents and can avoid the need of having to register under the charities commission but registering with the charities commission constitutes an official recognition by New Zealand’s government, acknowledging that the trust is a charitable one and is legally tax-exempt.
The author believes that over the next decade, many business models will move towards a charitable model. This has been the case in New Zealand and is currently a trend that is growing across the globe. Start your own here> Click here.
The article above was originally written by E v g e n y O r l o v on the Q.W. website, but we spent many hours changing the wording in order not to copy the article. However, we believe that it is only proper to give credit to the original author which we have done. This non-copy version, however, is true to the original in its intent and meaning.
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