New Zeland LTCs are corporations that allow the owners to pass the earnings directly through to the shareholders with no corporate taxation. The following are the main features of an New Zealand LTC:
• An LTC must be tax resident in New Zealand.
• It must have five or fewer look-through counted owners (treating related owners as one)—see Part 2.
• Only a natural person, trustee or another LTC can hold shares in an LTC. All the company’s shares must be of the same class and provide the same rights and obligations to each shareholder.
• All owners must elect for the company to become an LTC
• Once a company becomes an LTC it will remain so unless one of the owners decides to revoke the LTC election, or it ceases to be eligible to be an LTC
• Generally, an LTC’s income, expenses, tax credits, gains and losses are passed on to its owners. These are allocated to owners in proportion to the number of shares they have in the LTC. Owners can also deduct expenditure incurred by the LTC before they became a member, if they pass certain tests.
• Any profit is taxed at the owner’s marginal tax rate. The owner can use any losses against their other income, if the loss limitation rule applies.
• The loss limitation rule ensures that losses claimed reflect the owner’s economic loss in the LTC.
• The owners of an LTC are treated as holding the LTC’s property directly in proportion to their shareholding. When owners sell their shares they are treated as disposing of their share in this property and may have to pay any tax associated with this, if certain thresholds are exceeded.
• If the company is liquidated or ceases to be an LTC but otherwise continues in business, the owners are considered to have disposed of their shares at market value.
• Look-through applies for income tax purposes only. Under company law an LTC retains its corporate obligations and benefits, such as limited liability.
• An LTC is still recognised separately from its shareholders for:
–– GST (goods and services tax)
–– PAYE and employer tax responsibilities
–– FBT (fringe benefit tax)
–– RWT and NRWT (resident and non-resident withholding tax)
–– ESCT (employer superannuation contribution tax) and RSCT (retirement scheme contribution tax)
–– the income tax rules for company amalgamations.
Formation – $ 1,000.00 (Includes first year registered office)
Registered office Annual – $500.00
New Zealand address – $ 600.00/annual
Nominees – $ 600.00/annual
Assistance for opening Corporate Bank account – $ 600.00