Companies - and Regulations

Companies Act 1993
The Companies Act 1993 provides the basic rules for establishing and operating a company in New Zealand. If you want to form a company in New Zealand, this will have to be registered and there is a process to follow.

Your company must have:

  • Registered name
  • One or more shares
  • One or more shareholders with limited liability
  • One or more directors

Your company may have a constitution or it can adopt the one that is in the Act. Your company will become a legal entity in its own right and will continue to exist until it is removed from the Register of Companies files.

Company Law
If you want to run your business under a company you have to be clear on what the elements are that constitute a company and the responsibilities of having a company. Every company registered in this country must:

  • Maintain a registered office
  • Keep a register of shareholding and directors and charges over the company property
  • Comply with the reporting requirements if applicable

Under the Companies Act 1993 and the Financial Reporting Act 1993 every company must keep accounting records. These records are specified in the Companies Act which requires them to be kept in English and held on to for at least 7 years from the date they were filed.

Company Taxation
New Zealand resident companies pay New Zealand income tax on their world-wide income. Non-resident companies are only subject to tax on income sourced in New Zealand. A "company" is any body corporate or other entity with a legal personality distinct from its members. It includes a unit trust.

A company is deemed resident in New Zealand if:

  • it is incorporated in New Zealand; or
  • it has its head office in New Zealand; or
  • it has its centre of management in New Zealand; or
  • the directors, acting in their capacity as directors, control the company in New Zealand (whether or not their decision making is confined to New Zealand).

Resident and non-resident companies pay income tax at the rate of 33 %.

Balance Dates
New Zealand has a standard 31 March year end for tax purposes. However, it is possible to apply to Inland Revenue for a different date.

Domestic Dividends
New Zealand resident shareholders are generally subject to income tax on dividends received from New Zealand-resident companies. However, if the shareholder is a New Zealand-resident company, dividends from another New Zealand resident company are exempt from income tax as long as the companies are part of a wholly owned group of companies and have the same balance date.

Dividends from overseas companies are exempt from income tax. However, the recipient company is generally required to make a foreign dividend withholding payment at the rate of 33 % on the dividend received.

Tax Losses
New Zealand companies may carry forward a loss for tax purposes from one income year and offset it against the taxable income of a future income year, as long as they maintain a 49 % continuity of ultimate, individual shareholding (this is subject to certain tracing concessions).

Tax Loss Grouping Provisions
Tax loss grouping provisions permit offsets where the same group of companies obtains the tax benefits of the loss offset. A group of companies is formed for tax purposes if the companies have a minimum 66 % commonality of ultimate shareholding throughout the relevant tax period.

Consolidation Regime
New Zealand resident companies that are 100 % commonly owned can consolidate for tax purposes. Group members are taxed as if they were a single company.

Qualifying Companies
Closely held New Zealand resident companies can choose to become a Qualifying Company (QC) which provides them the ability to access capital gains made by the QC free of tax. Some QCs can also attribute tax losses to their shareholders.