NZ Look-Through Companies

A New Zealand look-through Company (NZLTC) is a company incorporated in New Zealand. Upon incorporation it is entered into the register of companies. It is a separate legal entity providing limited liability to its owners, with its capital divided into shares. A NZLTC is a transparent vehicle for New Zealand tax purposes akin to the US LLC. This is another useful vehicle that is finding traction with foreign owners. As opposed to Limited Partnership an owner can be the shareholder and the director of a NZLTC.

There are a few criteria that have to be met with NZLTCs such as that there can be only one class of shares with the same rights, shareholders can be natural persons, another NZLTC, a Trust, or can be a NZFT. NZLTCs must be resident in New Zealand and cannot be non-resident by virtue of application of a double tax treaty. Directors of NZLTC must be natural persons and cannot be corporate directors.

Taxation of the NZLTC

NZLTCs are treated as transparent for tax purposes and follow partnership taxation. Where the shareholders of NZLTC are individuals, tax resident outside New Zealand or New Zealand resident Trustees of a NZFT, then the shareholders will not be liable to New Zealand income tax on their foreign sourced income or any withholding tax at the time the dividend is distributed to its shareholders.

NZLTCs work well in combination with the NZFTs. At times it may be beneficial for the owners to have a company interposed between the underlying investments in the source country and the NZFT. A good reason for this could be a requirement of the settlor in a NZFT to further distance himself from the underlying assets of the NZFT. NZLTCs, just like NZFTs, provide a flow through tax treatment with addition of limited liability.

If you’re curious about whether a NZLTC is the right option for you, reach out to our Business Law team below.