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.
How it works
Company tax is paid on the company's taxable profit for the year via provisional tax instalments during the year and a final wash-up through the company's IR4 return, the same broad mechanism individuals and trusts use but at the flat 28% rate rather than progressive brackets. A company's tax obligations exist entirely separately from what its shareholders or directors are personally taxed on — the company is its own legal taxpayer.
The retain-versus-distribute decision is central to how a company structure is actually used for tax planning: profit kept inside the company for reinvestment is taxed once at 28% with no further personal tax due until it's paid out, while profit distributed as salary or dividends triggers personal tax at the recipient's marginal rate (offset by any imputation credit attached to a dividend). This is why companies are often favoured by business owners who want to reinvest profit rather than draw it all out for living expenses.
Look-through companies are the deliberate exception to flat company taxation — shareholders who elect LTC status have the company's income, expenses, and losses flow through to be taxed directly at their own personal rates, similar to a partnership, which suits smaller businesses (particularly early-stage rental property investors) wanting to offset company losses against personal income rather than trap them inside a 28% entity.
Frequently asked questions
Do all NZ companies pay the same 28% tax rate regardless of their size or turnover?
Yes — the 28% company tax rate is flat and applies equally to a small owner-operated company and a large corporation, with no size-based bands or lower rates for smaller businesses (look-through companies being the structural exception).
If I run a company, do I pay personal tax on top of the 28% company tax?
Only on money actually paid out to you as salary or dividends — profit retained inside the company is taxed once at 28% with no further personal tax due until it's distributed to you.
What's the tax difference between an ordinary company and a look-through company?
An ordinary company pays 28% tax itself and shareholders pay personal tax only on distributions, while a look-through company's income and losses flow directly to shareholders and are taxed at their personal marginal rates instead.
Related Terms
Imputation Credit
Imputation credits prevent the same company profit being taxed twice — once at the company level and again when it's paid out as a dividend to shareholders.
Income Tax
New Zealand income tax is calculated using a progressive bracket system.
LAQC / Look-Through Company
A Look-Through Company (LTC) is a special company structure where income, expenses, tax credits, and losses flow through to shareholders in proportion to their ownership interest, rather than being taxed at the company level.
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