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. Its capital is 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 a 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 NZLTC’s; such as that there can only be one class of shares with the same rights, shareholders can be natural persons, another NZLTC, a Trust, or can be a NZFT. NZLTC’s must be resident in New Zealand and cannot be non-resident by virtue of an application of a double tax treaty. This means that the company must be managed and controlled from New Zealand if there is a double tax treaty in place between New Zealand and the country of residence of the persons’ behind the NZLTC. In the case where there is no double tax treaty in place, the NZLTC will remain tax resident in New Zealand under the domestic law by the virtue of being incorporated in New Zealand. Directors of a NZLTC must be natural persons and cannot be corporate directors.
Taxation of the NZLTC
NZLTCs are treated as transparent for tax purposes and follows 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 NZFT’s. 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. NZLTC’s, just like NZFT’s, provide a flow through tax treatment with addition of limited liability.
Visual Representation of a Typical NZLTC Structure
New Zealand Look Through Companies are a good alternative to US LLC’s which can complement the NZFT structures well. Both of these entities therefore become good alternatives, whether alone or in combination, to vehicles established in classical tax haven countries.