NZer who is a non-NZ tax resident in the UK (UK non-dom)

[Incognito]

I am a non-NZ tax resident doing my time in the UK. A qualifying NZ family trust (which also includes other NZ settlors) where I was originally a founding settlor owns the property I lived in before coming to the UK.

I am trying to determine the best way to obtain additional NZ IP's whilst retaining my exisiting tax status until I return to NZ one day.

It is my understanding an LAQC owned by the family trust maybe the way to go (as it would then be a NZ company, if I owned it from the UK it would be foreign). But I have some questions about this.

If it was owned by the Family Trust - does this make the trust personally liable for any tax issues or the trustees of the trust?
If the LAQC makes a loss who is this attributed too? Can the loss be held by the LAQC or trust or does it need to pass-though to a beneficiary?
How do you go about selling the shares in an LAQC? Can they be sold for any amount i.e. 1 cent? or do they need to be some sort of market value?

Is it better for any positive cash flow IP's to be owned by a trust over LAQC?

Scenario: Trust owns IP. IP generates positive cashflow. Profit after exepenses is taxed at 33% (trust rate) - however this is distributed to me (a non-NZ tax beneficary) where I only need to pay 19.5% Non resideants tax on the rent?

Is the following legal?

Scenario: Trust owns LAQC which owns IP. IP generates negative cashflow. I fund the difference from offshore capital because I want to. A loss is generated. The loss accrues in the LAQC year on year. When I return to NZ LAQC sells shares to me (so it has been an NZ company all along). I get a NZ job and claim the losses as a tax benefit until exausted. I sell the LAQC shares back to the trust which sells the loss making properties and retains the profit.

I am sure I have complicated things no end. Whats the advice of you guys for someone in my position?
Non-NZ Tax residant, a NZ Family trust owning one property, substantial amount of pounds to invest. Not returning to NZ for a while?

Thanks.

[donna]

Welcome to the forum Incognito!

As you can see I have moved the post to from 'property investment' to this forum ' finance, legal, tax' and you'll more than likely get some good responses here.

My understanding is a company/trust (tax entity) can not have a share holding of 25% or more by non-residents if so it becomes a foreign tax entity.

Cheers,

Donna :P

[Julian]

I think the shareholders of LAQCs have to be "natural persons" ie human beings rather than other companies, trusts, or co-operatives.
Julian

[CJ]

A lot of questions so i will try and answer most of them correctly (Small disclaimer that some may be wrong).

A company incorporated in NZ will nearly always be NZ resident (it is one of the four tests).
If management and control is outside NZ it will be resident there.
Therefore it maybe dual resident (to complicated). So need to ensure management and control in NZ.

If an NZ company is owned more than 25% by a non resident, then it is classed a foreign company for company law purposes (different to tax purposes). the test however is not the same as tax resient but more of a domicile test. In which case it is possible that even though you are resident overseas, it could still be classed as a local company.

An LAQC can be owned by a trust. There are certain rules but it is possible.
The trustees will be liable but normally only to the extent of the trust assets.

When an LAQC makes a loss. it is transfered to the shareholder in that year. Therefore you cannot carry them forward until you return, transfer to your name then use them.

Losses will be stored up in the Trust for future use. They cannot be passed through to the beneficiary. therefore you have to ensure that at some piont, the trust will have income to utilise the losses.

Shares in a trsut can be transfered easily, but must be done at market value. A simple way to do this would be value of property, less mortgages divided by number of shares. ie. net asset value divided by shares.

If a property is positive cashflow and likely to have capital growth, it is probably best that the properties are held by the trust.

With a trust, always ensure that there is at least one settlor who is still resient in NZ (otehrwise you might get kicked out of the qualifying trust regime).

Lots of points there so I hope I got them right. If you are going to do this, it is probably best you get the structure sorted by an accountant to ensure you get everything right.

[Robot]

Interesting topic but a little hazy, firstly I thought (as discussed in another thread on the same subject) that an LAQC could indefinitely carry forward the tax loss??

Also, if you’re a New Zealander who is currently overseas and is a non resident for tax purposes what is the best structure to have? If I setup an LAQC how would I maintain management or control in N.Z? And if it does get classed as a foreign company, what are the implications?

Thanks

[CJ]

Interesting topic but a little hazy, firstly I thought (as discussed in another thread on the same subject) that an LAQC could indefinitely carry forward the tax loss??

Losses always flow through to the shareholder for an LAQC!!

The shareholder, whether individual, trust, on non LAQC company can then carry forward the losses indefinately.

Also, if you’re a New Zealander who is currently overseas and is a non resident for tax purposes what is the best structure to have? If I setup an LAQC how would I maintain management or control in N.Z? And if it does get classed as a foreign company, what are the implications?

Management and control is a tricky question - is it day to day or control by the director/s. Get these both in NZ and there wont be an issue. ie RE agent and someone in NZ looks after day to day and NZ resident is director.

Re best structure - who knows. Peple cant even decide on teh best structure for a Resident person. How can you have one structure when there are about 200 different tax systems which might apply. ie, even if you cound decide on the best from an Australian perspective, that might/will be different from a UK or UK perspective. What about the Netherlands or Latvia. Guatamala??