NEW ZEALAND Law and Practice Contributed by: Greg Neill, Fred Ward and Callum Burnett, Russell McVeagh
Russell McVeagh Level 30, Vero Centre 48 Shortland Street PO Box 8 Auckland 1140 New Zealand
Tel: +64 9 367 8000 Fax: +64 9 367 8163 Email: enquiries@russellmcveagh.com Web: www.russellmcveagh.com
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Companies are the most common legal vehicle for most business models in New Zealand. This is due to the simplicity of operation and governance, limited liability for shareholders and the local business com - munity’s familiarity with companies. However, the choice of legal entity and funding struc - ture is often based on a combination of commercial and tax-related factors, such as: • whether investors’ liability is limited; • ease of contracting; • the ability to raise capital; • the tax preferences of investors; or • applicable tax rates. In addition to companies, general partnerships and limited partnerships are often used for co-investment transactions and in certain sectors, such as project- based joint ventures and significant investment in infrastructure assets. Smaller businesses commonly utilise a sole proprietor model or a company. Other forms of trading vehicle are available (such as trading trusts) but these are less common. Companies A limited liability company incorporated in New Zea - land under the Companies Act 1993 (NZ) (“Companies Act”) is a legal entity in its own right and has a legal existence separate from that of its shareholders. In
general, subject to the company’s constitution and the general law, a shareholder of a company has liabil - ity limited to the amount of that shareholder’s capital contribution. A New Zealand incorporated company is taxed as a separate legal entity from its shareholders at a flat rate of 28%. New Zealand has an imputation system of corporate taxation whereby tax paid at the corporate level can be “imputed” to shareholders by attaching credits to dividends. The intention of this system is for income earned through the corporate form to be subject to only one level of taxation. As we note below, some companies are eligible to elect “look-through company” status, allowing them to be treated as fiscally transparent for New Zealand income tax purposes. General and Limited Partnerships Both general partnerships and limited partnerships are commonly adopted business structures in New Zea - land. A limited partnership is a separate legal person under New Zealand law, whereas a general partner - ship is not. The liability of partners is unlimited for a general part - nership, with each partner typically being jointly liable with the other partners for the debts and obligations of the partnership business. A limited partnership requires at least one general partner and one limited partner. A limited partnership’s general partners have unlimited liability (although a
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