Qualifying companies have tax rules that aim to treat the company and its shareholders as one entity.
No new elections can be made to become a qualifying company. Only companies that were qualifying companies before their income year started on or after 1 April 2011 can still be qualifying companies.
Qualifying companies have certain tax requirements that relate only to them:
- Only dividends with imputation credits attached are taxable to the shareholders.
- Capital gains can be distributed tax free without winding up the company.
- Interest that shareholders have paid to acquire shares isn’t fully deductible.
- QC’s that make a profit can only receive a loss offset and only make a subvention payment to another QC.