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Inland Revenue

Tax Policy

PUBLISHED 8 September 2015

Closely held company taxation issues

Feedback is sought on proposals to strengthen the closely held company tax rules. The main focus of the review is on ensuring that the look through company rules remain fit for purpose. Consultation closes on 16 October 2015. For more information, see the Minister of Revenue’s media statement and the officials’ issues paper.

Hon Todd McClay
Minister of Revenue

8 September 2015

Media statement

Closely held companies tax rules examined

Revenue Minister Todd McClay says a paper released today for public feedback aims to make the current tax rules for closely held companies more workable.

Closely held companies, which typically have only few shareholders, make up a significant proportion of the total number of companies in New Zealand.

There are specific tax rules available for such companies, including the look-through company rules introduced in 2011, to ensure that the decision on whether to convert a small business to a company is not driven by tax considerations.

“A range of concerns have been brought to my attention about the workability of the look-through company rules. If the rules are not working as intended then they could be distorting business decisions as well as deterring more businesses from becoming look-through companies.

“Therefore the review has focussed mainly on simplifying these rules, ensuring they remain appropriately targeted and reducing compliance costs,” says Mr McClay.

The review also addresses some aspects of the rules applying to other closely held companies.

“This work is consistent with the Government’s general objective of simplifying tax requirements and reducing compliance costs for business. The Government wants businesses to grow and prosper.

“The tax system can help by ensuring that the tax rules for companies are clear, provide certainty and that tax obligations do not get in the way of doing business,” Mr McClay says.

The issues paper Closely held company taxation issues is available at Submissions close on 16 October 2015.

Media contact: Lesley Hamilton  027 490 1345