To maintain qualifying company status, companies must continue to meet eligibility requirements and hold valid elections throughout the income year.
Qualifying company requirements
The company must:
- be a New Zealand resident company for the entire year (and not treated as a non-resident due to a double tax agreement)
- have no more than 5 shareholders, unless it is purely a flat-owning company.
The company must not:
- be a unit trust
- be a foreign, look-through or loss attributing qualifying company
- receive more than NZ$10,000 in foreign sourced non-dividend income each year
- be treated as a non-resident under a double tax agreement
- have to pay income tax in any other tax jurisdiction.
Qualifying companies must not have:
- income interests in a controlled foreign company
- interests in foreign investment funds that produce direct income interest of 10% or more.
Shareholders of qualifying companies
Each shareholder must be one of the following:
- a natural person
- another qualifying company
- a trustee of a specified kind of trust.
If the shareholder is a trustee, the trust must:
- have beneficiaries that are a natural people or qualifying companies
- pay all dividends received from the qualifying company and distributed to the beneficiaries as income.
Shareholders are personally liable for income tax not paid by the company. Liability of the company’s tax will be shared based on shareholders effective interest.
Shareholders need to maintain minimum voting interests of at least 50% for the period beginning on 30 March 2017 and ending on the last day of the relevant income year.