New Zealand Look-Through Companies are unique and advantageous international tax planning vehicle.
New Zealand Look-Through Companies (LTC) are a recent development in New Zealand law, having been instated into the country’s regulatory system midway through 2011. While on the outset they were created to address issues in the country’s regulations for property investors, these entities were also endowed with a unique properties that have proven to be very useful for international business people.
These new business vehicles are considered to be a “transparent entity” (also known as pass through, fiscally transparent, tax transparent, etc.), meaning that their profits are “passed through” to their shareholders in the form of direct distributions, and not dividends. In the case that a Look-Through Company only has overseas shareholders and derives all of its profit outside of New Zealand it will not be subjected to national income taxes, effectively bringing its New Zealand tax liability to 0%. Utilizing the flow through property makes these entities a perfect tool for international investors looking for a reputable business vehicle with which to conduct their global affairs.
While being an incredibly useful international business tool, these pass through entities are also very easy to establish, and just like New Zealand Limited Liability Companies, and the only difference is that they have filed one extra application form with the Inland Revenue Department. In order for the transparent entity to be formed, a Limited Liability Company must first be incorporated. Once the shareholders of the newly incorporated company unanimously agree to elect for pass through status, the entity can file the appropriate application form.
New Zealand Look-Through Companies are subject to some conditions in order to retain their statuses and the 0% tax benefits. Namely, the entity can only have five or fewer shareholders, all of whom are individuals, other Look Through Companies or Trustees.
Look -Through Companies are also bound by the same set of compliance and filing rules as regular companies, such as keeping a current and accurate set of documents and accounting records. The Company will also be required to submit annual statements and returns, along with records of the distribution of profits between the shareholders. While these regulations are easy to follow, it is still recommended that that any international investors seeking to open a New Zealand business should still talk to a qualified New Zealand accounting and taxation consultant, who can provide greater clarity and assistance on New Zealand regulations.
