The IRD has also released a discussion document in September 2015 on the taxation of look through companies and closely held companies. Broadly the proposals include recommendations that:

1. There are some minor amendments to the count test for look through companies and trust shareholders to remove some loop holes.
2. It should be possible to have more than 1 class of share for look through companies provided they all carry the same voting rights.
3. Look through companies cannot be used by non-residents to derive foreign income. We have a problem with this as New Zealand has a foreign trust regime which encourages this as well as the limited partnership regime which can be used for the same purpose. We cannot see why from a policy perspective they are suddenly seeking to prevent look through companies being used for these reasons.
4. The IRD has confirmed that it intends to continue to allow residents to derive foreign sourced income through look through companies without limitations. We use these extensively for structuring purposes for holding both active and passive investments in foreign countries.
5. The loss limitation rule will be removed for look through companies unless they are in a partnership of LTCs.
6. There should be no remission income for a shareholder when an amount owed to them by an LTC is subsequently remitted because the LTC cannot repay the loan. While this may seem logical, the tax community has been turning itself inside out trying to work out whether the shareholder is actually that same person or some sort of alter ego.
7. When a company enters into the LTC regime, there is a deemed wind up with shareholders taxed at their marginal rate rather than the existing 28% company rate. This has provided an ongoing opportunity to avoid 5% tax on entry into the LTC regime with many advisors using it as an alternative to liquidation.
8. There is proposed to be some liberalisation of the restrictions around tainted capital gains whereby closely held companies enter into transactions with associated non-corporates, eg trusts. These gains should be able to be distributed tax free on winding up and not simply in situations where the gain is derived in the course of a winding up as is currently the case.