By Bruce Bernacchi and Helen Corner
Wednesday 1st October 2003
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LAQCs have two key tax advantages:
An LAQC is a creation of tax law. For all other purposes, an LAQC is just an ordinary company and has to meet normal requirements, such as filing annual returns with the Companies Office.
LAQCs have some disadvantages:
Any other rules?
An LAQC must:
The directors and a majority of the shareholders must notify the IRD that the company is to become both a “qualifying company” and an LAQC. Shareholders must agree to be personally liable for the income tax of the LAQC.
Is an LAQC a tax dodge?
Using an LAQC to invest in residential property that is rented to tenants is not tax avoidance or evasion. However, using an LAQC to own your family home, which it then rents back to you, risks being viewed by the IRD as tax avoidance. If the IRD successfully attacked this arrangement it’s likely that any tax benefits you had claimed through using the LAQC structure would be reversed. The IRD could also impose penalties and interest charges. In the right circumstances, LAQCs are appealing to those looking to maximise the commercial and tax advantages available to investors in residential rental properties.
Bruce Bernacchi and Helen Corner, Minter Ellison Rudd Watts
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