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How are non-resident shareholders of a Look Through Company registered in New Zealand taxed in NZ?

Asked in Corporate Taxation for New Zealand

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The company is a LTC registered in NZ and has proper office in NZ. Its shareholders are not resident in NZ. The LTC trades and earns income and incurs expenses in NZ and globally. It has a NZ resident director but is managed outside of NZ.

I understand that the NZ LTC is required to include its global income and expenses in its annual financial statements and its taxable income or losses are allocated (passed through) to its shareholders - is this correct?

I also understand the LTC is not required to pay any income tax in NZ is this correct?

Are the shareholders required to pay NZ income tax on their allocated share of the global taxable income/loss allocated to them, despite the fact that they are not resident in NZ?

Thank you
Colin
 
LTC Tax Trade Foreign shareholders
 
Posted by CCG on Jul 08, 2014 at 11:55
 

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"Yes" to all questions.
Source: http://www.ird.govt.nz/resources/a/f/afcafc804626f487bfe8bf7747109566/ir879.pdf
 
Posted by prominee.com on Jul 13, 2014 at 10:28
 

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Thank you for your answer. However, I understand that the situation for the NZ shareholders is different if the income/loss is not from a NZ source, bearing in mind that the company is managed offshore but has a Permanent Establishment in NZ. So some of the income/losses are NZ sourced.
 
Posted by CCG on Jul 14, 2014 at 00:09
 

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I will always be amazed by the lack of planning, or the after facts questions in this free forum... My answer gives only principles of what could happen, as I don't know where each residents are located, nor have access to the P&L.

You cannot have a NZ PE if you are saying that the company is managed from outside NZ: it is either way, not both.

-Shareholder is NZ resident: 100% taxed in NZ.
-Shareholder is not-NZ resident:there should be an apportion rule between offshore and NZ-sourced income (non NZ income will not be taxed in NZ for sure). Now after the apportion, there are 3 cases possibles for the NZ-sourced income:
A*100% taxed in NZ (either with a withholding or a filling of income tax in NZ)
Now if there is a relevant tax treaty with NZ and the state of resident of the shareholder:
B**the rate could be lower than of the NZ income tax rate
or
C**taxation can occur in the resident state of the shareholder only.

A tax treaty use is CLAIMED. So if you are smart enough, and if the profits are under the NZ yearly taxable threshold, it might be wise to fill in NZ...
Only you can know.
 
Posted by prominee.com on Jul 14, 2014 at 23:56
 

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Posted by jlena on Oct 23, 2015 at 10:48
 

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