Company Tax

New Zealand companies pay income tax at a flat 28% rate on taxable profit, unlike individuals who face progressive rates from 10.5% up to 39% (look-through companies, which have elected LTC status, are the exception — their profit is taxed directly at shareholders' personal rates). This flat rate applies equally to a small owner-operated company and a large corporation.

Profit retained in the company (not paid out as salary or dividends) is taxed once, at 28%, with no further tax due unless and until it's distributed. Profit paid out to shareholders as a dividend carries an imputation credit representing the 28% company tax already paid, so the shareholder's personal tax is reduced by that credit when the dividend is included in their taxable income.

For owner-operators deciding between a company structure and operating as a sole trader, the comparison usually comes down to: sole traders pay personal marginal rates (up to 39%) on all profit immediately, while a company structure lets profit be taxed at 28% while retained, with personal tax only crystallising when money is actually drawn out as salary or dividends — useful for reinvesting profit, less useful if most profit needs to be drawn out for living expenses anyway.