Pearse Trust Blog

Introducing The New Zealand Look Through Company

Tweet

 

Background

A new and innovative form of New Zealand Limited Liability Company known as a "Look Through Company" (LTC) has been available for registration in New Zealand since 1^st April 2011.

As is common when new vehicles or regimes are introduced to any jurisdiction, their key features, treatment for taxation and general applications require careful consideration and this blog post is intended to provide an overview of the regime.

LTC Regime Overview

The LTC is an ordinary Limited Liability Company in all legal respects, which appropriately structured, and subject to making the necessary election, will be fiscally transparent for taxation purposes, resulting in similar taxation treatment as that which is applied to New Zealand Limited Partnerships.

All income, expenses, tax credits, rebates, gains and losses of an LTC will be passed to its shareholder(s) in proportion to their interest(s) in the LTC. As the shareholder(s) are effectively the recipient(s) of the LTC’s income, foreign shareholder(s) (i.e. non-NZ resident shareholders) will not have a New Zealand tax liability where the LTC’s income is generated from non-New Zealand sources.

Additionally, where the shareholder is a New Zealand Foreign Trust, and where the LTC’s income is generated from non-New Zealand sources, the New Zealand Foreign Trust would not be subject to New Zealand taxation on receiving such income.

The LTC provides the benefit of limited liability protection for its shareholder(s) and has separate legal status itself, meaning that it can contract or hold assets in its own name. In all other respects, aside from its transparency for taxation purposes, the LTC will appear to outside third parties as an otherwise ordinary New Zealand Limited Liability Company.

Election Requirements

In order to be eligible to elect to be treated as an LTC, the Company must:

• Have 5 or fewer shareholders (a counted persons test applies resulting in certain family members being considered equal to one shareholder);
• Be New Zealand resident for tax purposes (it is essential that residency does not move to another jurisdiction under a tax treaty tiebreaker test, therefore the mind and management must be centred in New Zealand);
• Have only natural living persons or trustees as shareholders (nominee shareholders are allowed); and
• Only issue shares which have the same voting and participation rights.

The LTC presents as a useful addition to the international planning environment, and for non-New Zealand residents, this innovative vehicle provides many benefits from a wealth management and cross-border trading perspective.

Download Whitepaper

Interested in New Zealand as a jurisdiction? We also provide New Zealand Trusts and Limited Partnerships. Learn more by downloading our New Zealand whitepapers.