Is the New Zealand Qualifying Company Regime Achieving its Original Objectives?

Abstract:     
In 1992, New Zealand adopted 2 hybrid entities for taxation purposes, known as Qualifying Companies, and Loss Attribution Qualifying Companies. It was stated that these entities would provide members with limited liability, but would be taxed in a similar manner to partnerships. New Zealand's Qualifying Companies and Loss Attribution Qualifying Companies regimes are analyzed to ascertain whether these regimes have been successful in achieving their original objectives. While there are continued statements that QCs, and especially LAQCs, are taxed effectively as general partnerships, it has been demonstrated that there are a number of inconsistencies. The existence of such inconsistencies infringes the principle of neutrality in the tax system. These inconsistencies include the treatment of part year losses, foreign income, liability for penalties, nonresident members and restrictions on eligibility requirements. The New Zealand government should consider the implications of the QC and LAQC regimes not meeting their objectives.

Number of Pages in PDF File: 4

Keywords: New Zealand, qualifying company, loss attribution qualifying company, QC, LAQC,

JEL Classification: K34

Accepted Paper Series