Requirements of a qualifying company
To maintain status as a qualifying company you must meet all these requirements for the entire income year:
- The company cannot be a unit trust or foreign company.
- The company cannot have income interest in a controlled foreign company or an attributing interest in a foreign investment fund that is a direct income interest of 10% or more.
- The company must not receive more than NZ$10,000 in foreign sourced non-dividend income per year.
- Each shareholder must be a natural person, qualifying company or trustee.
- The number of shareholders in the company must not exceed 5, unless it is purely a flat-owning company.
- Valid elections must be in place for the whole of the income year.
- Qualifying company status must not be revoked.
- There must not be significant change in the shareholding of the qualifying company.
If a shareholder in a qualifying company is a trustee:
- Beneficiaries of the trust which received dividends from the qualifying company must be a person or qualifying company.
- The trustees must distribute dividend income from a qualifying company during the income year to beneficiaries as beneficiary income.
Re-electing for qualifying company status
If there is a change in company shareholding, any new shareholder with legal capacity who has not previously elected must re-elect for the company to remain a qualifying company.
These need to be made by shareholders or an enduring power of attorney. No one else can elect on behalf of the shareholder.
Members that need to sign the re-election are:
- any new shareholders who have not previously elected into qualifying company status
- shareholders that have re-gained shares after ceasing to own shares
- any new trustee in a trust shareholder.
Revocations apply from the beginning of the income year we receive the notice in. They can apply to later years if we are notified.
There is a 63-day grace period for a company to re-elect. Following the death of a shareholder, a new shareholder has a 365-day grace period.