A New Zealand Limited Partnership provides a convenient and flexible structure encompassing the best features of modern company and partnership structures. It is similar to the Limited Partnership model found in many other jurisdictions.
The New Zealand Limited Partnership has become an increasingly attractive alternative to the trust, foundation and even "offshore" investment holding company because it can offer similar (and often enhanced) levels of flexibility, confidentiality, asset protection and estate planning opportunities when combined with the advantages of New Zealand as a jurisdiction including:
New Zealand is not on any country's "black list" of tax havens.
The Limited Partnership is resident in a reputable OECD member country, with a stable legal, political and economic environment.
The Limited Partnership has access to inexpensive professional services of excellent reputation in New Zealand.
New Zealand Limited Partnership law is modern and contains special provisions facilitating the use of a New Zealand Limited Partnership as a modern international investment structure.
Uses of a New Zealand Limited Partnership
A New Zealand Limited Partnership can be used for just about any purpose and is ideally suited to investment funds. They are also particularly suitable as the underlying asset holding vehicle for a New Zealand foreign trust. Having both the trustee and the asset holding vehicle established in the same jurisdiction simplifies administration of the structure, reduces legal complexities and extends to the underlying entity the benefits of New Zealand as a reputable jurisdiction.
An example of the use of a New Zealand Limited Partnership would be where a donor of assets resident in, for example, Switzerland ("Donor") may wish to protect assets, preserve confidentiality and otherwise provide for future generations of his family by using Trustees Executors to form a Limited Partnership. We would then incorporate a New Zealand limited liability company to be the General Partner which would in turn register the Limited Partnership.
Through regular contact with us, or even by having some formal control over the General Partner, the Donor can determine the investment strategy and distribution policy of the Limited Partnership. As the limited partnership is a contractual arrangement there are no issues as regards "sham" or "alter ego" which can arise in relation to trusts.
The Limited Partnership agreement can provide for the limited partnership to be wound up after a certain period, on the occurrence of a certain event (such as the death of the Donor), or allow for the Limited Partnership to exist in perpetuity.
The limited partnership agreement and the constitution of a corporate General Partner can set out a family investment strategy and a management process that can be maintained over several generations. The board of directors of the General Partner can be provided by Trustees Executors and/or the Donor and members of the family.
The Limited Partnership will then execute the investment strategy, for example, through an investment holding company in the British Virgin Islands, an investment management account in Hong Kong, a bank account in Switzerland or real property holdings in France. It is important to remember however that there should be no income earning assets situated in New Zealand otherwise tax will be paid on that income in New Zealand.
The members of the family would normally be the Limited Partners - either directly or through companies or trusts in which they have interests. The partnership agreement should be specific to the individual circumstances of the family and provide for how, when, to whom and in what proportions distributions can be made to the Limited Partners. Normally family members will be restricted as to transfers of their partnership interests outside of the family.
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General Features of a New Zealand Limited Partnership
Separate legal entity with continuity of existence.
Full capacity and powers both within and outside New Zealand, subject to any limitations set out in the partnership agreement.
No requirement to make capital contributions.
Distributions may be made provided the partnership meets a straightforward solvency test. Details of limited partners must be registered but are not available to be searched by the public and are expressly stated to be confidential. The public may search the register for details including the name of a limited partnership, date of registration, registered office and service address, and the names and addresses of the general partners.
Taxation
Limited partnerships are fiscally transparent. The partners must file a joint return which must include details of the partnership’s income, including non New Zealand sourced income. The partnership itself is however not tax assessed.
The tax laws to which the Donor and the Limited Partners are subject to will change constantly. It is therefore essential that tax advice be taken in all relevant jurisdictions and on a regular basis. However, as the New Zealand Limited Partnership is essentially a "pass through" vehicle, each family member Limited Partner will be taxed only on the distributions it receives from the Limited Partnership in the jurisdiction(s) to which she or he is resident for tax purposes. There will be no tax payable in New Zealand unless there is income earned in New Zealand.
For further information on New Zealand Limited Partnerships please contact:
Roger Fairbairn
International Client Account Manager
Phone: +64 4 495 0995
Email: roger.fairbairn@trustees.co.nz
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