Doing Business Guide New Zealand - GKK Partners
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Edition No. 1 March 2019 Doing Business Guide New Zealand
About This
This guide has been produced by the Morison KSi New Zealand member
firm for the benefit of their clients and associate offices worldwide who are
Guide
interested in doing business in New Zealand.
Its main purpose is to provide a broad overview of the various things that
should be considered by organisations when setting up business in New
Zealand.
The information provided cannot be exhaustive and – as underlying
legislation and regulations are subject to frequent changes – we
recommend anyone considering doing business in New Zealand or looking
to the area as an opportunity for expansion should seek professional
advice before making any business or investment decision.
While every effort has been made to ensure the accuracy of the
information contained in this guide, no responsibility is accepted for its
accuracy or completeness.
The information in this guide is up to date as at the edition date.
For more information, please contact:
Hayes Knight
www.hayesknight.co.nz
Business Advisory Taxation
Tristan Dean Phil Barlow
Business Advisory Director Tax Director
E: tristan.dean@hayesknight.co.nz E: phil.barlow@hayesknight.co.nz
T: +64 9 448 3231 T: +64 9 448 3233
Hayes Knight office locations
Level 1 Level 2
5 William Laurie Place 31-33 Great South Road
Albany Newmarket
Auckland 0632 Auckland 1051
T: +64 9 414 5444
F: +64 9 414 5001
While every effort has been made to ensure the accuracy of the
information contained in this booklet, no responsibility is accepted for its
accuracy or completeness.
www.morisonksi.comEdition No. 1 March 2019 Contents Introduction1 Business Structures 3 Labour and Personnel 6 International Mobility 9 Taxation System 11 Banking and Finance 14 Reporting Requirements 17 Agencies Providing Assistance 20 Grants and Incentives 22
Introduction Why New Zealand? by population and geographic area
is Auckland. The dominant cultural
Given its stable and globally groups are of European, Maori and
competitive economy, and efficient Asian descent. Other smaller groups
tax regime, New Zealand is a highly include Pacific Islanders and many
attractive country to do business in. other ethnicities, which has resulted
in an ethnically diverse population.
In recent surveys, New Zealand has
consistently ranked as one of the English is the everyday language
best countries to do business in. spoken in New Zealand; Maori is the
New Zealand is recognised as the other official language.
most business-friendly environment
in the world: the Doing Business Political system
20191 report by the World Bank
ranks New Zealand 1st out of 190 New Zealand is an independent
countries for the best place in the member of the British
world to do business. It is also Commonwealth. Queen Elizabeth
ranked as the easiest place in the II is the Head of State, her
world to start a business. representative in New Zealand
being the Governor General.
New Zealand’s location is a great
base for doing business in the Asia Parliament is the governing body of
Pacific region and globally. It has New Zealand. Parliament is composed
many free trade agreements in place of a single legislative chamber
with major economies around the consisting of the House of
world, along with closer economic Representatives, which generally has
partnerships and economic co- 120 members. The House is elected
operation agreements. New for a maximum 3-year term using a
Zealand has excellent transport and mixed member proportional (MMP)
distribution links. system. MMP is a form of proportional
representation where voters each
New Zealand is well known for cast a party vote to choose the
being a friendly place and given its political party, and an electorate
climate, beautiful landscape and vote to choose which individual
great living conditions, is a fantastic from their electorate they want to
place to live and prosper. be their Member of Parliament.
It is a country that is very Education, social welfare services,
welcoming of investors. police, and fire control are under the
control of the central government.
Geography Territorial councils administer local
and community services such as
New Zealand is situated in the water supply and rubbish collection.
South Pacific Ocean, 1,600 km
southeast of Australia. The country Legal system
consists of two large islands, the
North Island (115,000 km2) and The New Zealand legal system
South Island (151,000 km2), together is based on the English common
with a number of smaller islands, law system. The judicial system
some close to its shores and others comprises three main tiers: the
hundreds of kilometres away. lower District Courts, the upper
High Courts, and the Court of
The population of New Zealand is Appeal, with a further and ultimate
1. http://www.worldbank.org/content/dam/
doingBusiness/media/Annual-Reports/ almost 4.8 million. The capital city appeal to the Supreme Court.
English/DB2019-report_web-version.pdf is Wellington, but the largest city Until the establishment of the
www.morisonksi.com New Zealand 1Supreme Court (in January 2004),
New Zealand’s highest Court of "New Zealand is a free
Appeal was the UK Privy Council. market economy that
Although there are a number of
specialised tribunals and courts competes globally. Its
(such as the Environment Court and inflation rate is one
the Taxation Review Authority) that
have judicial functions, in almost all of the lowest in the
cases their decisions can be subject industrial world"
to appeal to a higher court.
The economy partners being Australia, China,
Japan, Singapore, the UK and
New Zealand is a free market the USA.
economy that competes globally. Its
inflation rate is one of the lowest in New Zealand has a very close
the industrial world. trading relationship with Australia,
governed by the Australia– New
New Zealand’s gross domestic Zealand Closer Economic Relations
product (GDP) was NZ$ 289 billion Trade Agreement (CER), which has
for the year ended March 2018. removed most restrictions on trade
In the recent World Bank Doing between the two countries. CER
Business survey2, New Zealand was includes undertakings to ensure that
ranked as the best country in terms New Zealand is guaranteed access
of ease of doing business in the to the Australian market in a number
world. New Zealand has also been of industries and to ensure that
ranked the 1st least corrupt country, trade develops under conditions of
by Transparency International in its fair competition.
Corruption Perceptions Index 20173.
Foreign investment is welcomed
New Zealand has a range of and the government is keen to
manufacturing and service sectors, promote economic development,
which complements a very efficient business, and employment growth,
agricultural sector. The economy is as illustrated by the government’s
heavily trade-orientated, with the Grown and Innovation Framework,
agricultural, horticultural, forestry, which aims to return New Zealand
mining, energy and fishing sectors to the top half of the OECD in terms
playing an important role in the of GDP per capita.
export sector and in employment.
Overall, the dairy sector continues New Zealand has a freely floating
to account for the New Zealand’s exchange rate that typically
largest export earnings. fluctuates in line with currencies of
its major trading partners, especially
New Zealand’s dependence on Australia, Japan and the USA.
trade means that it is sometimes
vulnerable to fluctuations in New Zealand does not operate
commodity prices and to its trading any foreign exchange controls or
partners’ economic performance. restrictions on either inward or
Despite this, New Zealand is a low- outward flow of funds, nor is there
risk place to do business, due to the any requirement to report the
2. http://www.doingbusiness.org/en/
long-term stability of its economy transfer of funds.
rankings and political climate.
3. https://www.transparency.org.nz/2017-
corruption-perceptions-index-ranks-new- New Zealand has worldwide trading
zealand-number-one/ relations, its most important trading
www.morisonksi.com New Zealand 2Business A foreign investor may conduct
business in New Zealand under the
from taking part in the management
of the partnership.
Structures entities described below.
Trust
Sole proprietorship
A business may be carried on
A sole proprietor is an individual, by a trust. A trust can be set up
therefore no separate legal entity is whereby the trustee (or trustees)
involved. The business is operated owns the business assets and
by the individual through the carries on the business on behalf
individual. As no distinction is made of the beneficiaries of the trust.
between the business assets and A trust does not have separate
the personal assets of the individual, legal existence like a company. All
the individual is personally liable in transactions in respect of the trust
all aspects of the business. There are undertaken by the trustees.
is no system in New Zealand of A trust is, however, required to
registering a business name except file a tax return; and in certain
the reservation of a company name. circumstances, the trustee is
Accordingly, there are no special required to pay tax.
steps required to become a sole
proprietor. Joint venture
Partnership A joint venture is an arrangement
between two or more entities
Partnerships are defined in the who contribute resources for a
Partnership Act 1908 as the relation specific purpose, usually for a
that exists between persons who limited duration. A joint venture
carry on a business in common with will not be jointly and severally
a view to profit. A partnership is liable unless the nature of the
not a separate legal entity. Partners joint venture so prescribes. A joint
are jointly and severally liable venture is itself not subject to tax
for the partnership’s debts and and is not required to file an income
have unlimited liability. Individual tax return, unless it elects to be
partners are taxed on their share treated as a partnership for income
of partnership income at their tax purposes. A joint venture is a
individual tax rates. separate taxable entity for GST
purposes and must file GST returns
Limited partnership on its own account. For more
information on GST, see the section
A limited partnership is a separate on Taxation.
legal entity that provides the
protection of limited liability for Look-through company
its limited partners, but is taxed
in the same way as a traditional The look-through company regime
partnership. A limited partnership was introduced from 1 April 2011 and
must be registered and have a effectively replaced the qualifying
partnership agreement, at least one company and loss-attributing
general partner and one separate company regimes (however,
limited partner. The general existing qualifying companies can
partner is liable for all the debts continue). A look-through company
and liabilities of the partnership, is transparent for tax purposes.
while the limited partner’s liability is Income and expenses pass through
limited by their contribution to the to the owners and are taxed at
partnership and is also prohibited the owner’s marginal tax rate. To
www.morisonksi.com New Zealand 3become a look-through company, Branch of an overseas • Consent of the shareholder (for
the following requirements must be company each shareholder)
met:
• The notice reserving the
Before conducting business in company’s name
• The entity has separate legal New Zealand, overseas companies
existence separate from its • A copy of the constitution, if the
must ‘reserve’ their name with the
members company is to have one.
Registrar of Companies. An overseas
• The entity is resident in New company must then register with
Applications to the Registrar must
Zealand for tax purposes the Registrar of Companies within
also include:
10 working days of commencing
• The entity has five or fewer
business. Registration includes filing:
owners • The name and residential address
of each director
• All owners have look-through • A certified copy of its certificate
interests of incorporation and articles and/ • Similar details for the proposed
or constitution shareholders, and the number of
• A valid election is filed with the
shares to be issued respectively
Inland Revenue. • A list of its directors and the
to them
name of a person in New Zealand
authorised to accept process • Details of the registered office
Company
notices on its behalf. and address for service of
Companies in New Zealand are documents, both of which must
The overseas company may also be in New Zealand.
governed by the Companies Act
be required to obtain the Overseas
1993. A company is a separate
Investment Office’s prior consent. A New Zealand company must have
legal entity capable of holding
assets in its own name. Company at least one New Zealand resident
There is no requirement that New director. There is one exception to
shareholders’ liability may be either
Zealand directors sit on the board of this, in that person can also be a
limited or unlimited, and normally
an overseas company. person resident in Australia where
companies are registered with
shareholder liability limited to that person is also a director of an
A branch is not a separate legal Australian company.
the share issue price. To become
entity from the overseas company.
incorporated under the Companies
Act 1993, the only requirements are: Shareholders of companies
Overseas companies must incorporated in New Zealand
prepare separate audited financial automatically receive limited
• A name
statements for their New Zealand liability.
• One or more shares branch and file these, together with
• One or more shareholders separate financial statements for Starting a business
their worldwide operations, with the
• One or more directors, of whom Registrar of Companies. Once an operating structure is
at least one director must either
chosen, a few other matters must be
—— live in New Zealand; or
Subsidiary addressed.
—— live in an enforcement
country and be a director
As with a branch, the company name Naming the business
who is registered in that
must be reserved and the relevant
enforcement country
administrative documentation must With tens of thousands of
(currently, Australia is the
be registered with the Registrar of businesses operating in New
only enforcement country
Companies. Once the name has been Zealand, it is quite possible that your
per Regulation 12 of the
approved and reserved with the preferred choice could already be
Companies Act 1993
Registrar, the following incorporation in use or contain banned words or
Regulations 1994)
documents must be filed: phrases. There are two places to
• A registered office and address check if you can use your intended
for service. • Consent to act as a director, and business name: The Companies
a certificate for each director Office, or the Intellectual Property
confirming that they are not Office of New Zealand (IPONZ).
disqualified from acting
www.morisonksi.com New Zealand 4The Companies Office their own IRD number. To get an
IRD number, a New Zealand bank "When a business starts
It is possible to reserve a business account is also typically required. employing staff, they
name on the companies register for Visit www.ird.govt.nz.
20 days; during this time, it is must register as an
impossible for others to reserve the Register with the Companies Office employer with the IRD.
same or a similar name. Reserving a
company name costs (at the time of In addition to registering with the Upon registering, the
print) NZ$ 11.50 and can be done IRD, companies are required to be business is typically
online. That name only becomes incorporated with the Companies
permanently secured once the Office. While companies require
asked whether they
company is registered. The an IRD number, rather than also wish to register
Companies Office is also the place to going through the IRD this can
find government restrictions on the typically be obtained through the
for fringe benefit tax
types of names you can use. Visit Companies Office when a company (FBT) and the employer
www.business.govt.nz/companies/. is registered for incorporation. superannuation
This can be done online at the
IPONZ Companies Office website (www. contribution tax
business.govt.nz/companies/). (ESCT)"
This is the organisation where
copyright, patents and trademarks Register for goods and services tax
on original commercial assets – Registering for licences, consents
including business names – are Businesses must register for GST (via and permits
registered. The IPONZ database can the IRD) once they reach (or expect
be used to determine whether a to reach in the next 12 months) New Zealand’s regional councils
preferred business name is already an annual turnover of more than and other regulatory bodies can
being used as a commercial asset. NZ$ 60,000. Once registered, also impact upon the running and
IPONZ is also where logos and any the business collects GST for the set-up of a business. For example,
unique combination of words and government on the goods and ‘work from home’ businesses,
images that make up a business services it sells, and can then claim cafés and bakeries first have to
brand can be registered as a trade GST back on the goods and services obtain a licence from their regional
mark, thus preventing others from bought for the business. Businesses council. The local councils are also
copying it. Visit www.iponz.govt.nz. with a turnover under NZ$ 60,000 responsible for regulating health
may choose to register voluntarily. and safety standards for all business
Note: Unlike companies, sole traders See the section on Taxation to find and building permits. They should
and partnerships don’t have any out more about GST. therefore always be the first point
protection over their business of contact before starting the
names. However, they can apply Register to become an employer business. Some industries also have
for a trade mark from IPONZ for to abide by a specialist regulatory
their brand or logo to give them When a business starts employing authority that regulates product
exclusive rights to use it in a unique staff, they must register as an and service standards, the use
way. employer with the IRD. Upon of environmental resources, and
registering, the business is typically anything else that might concern
Registering your business asked whether they also wish to public safety by ensuring that
register for fringe benefit tax (FBT) businesses adhere to the relevant
Register with the Inland Revenue and the employer superannuation standards and codes of practice.
Department contribution tax (ESCT). See the Visit http://www.business.govt.nz/
sections on Taxation and Labour laws-and-regulations/regulatory-
All businesses in New Zealand are and Personnel to find out more authorities.www.hayesknight.co.nz
required to register with IRD for about these. Businesses that only 11
tax purposes. Businesses operating hire contractors are not required to
under a sole trader and partnership register as an employer unless the
structure can lodge the business’s type of work undertaken by the
income under the owner’s personal contractor falls under the schedular
IRD number. Partnerships must have payments regulations.
www.morisonksi.com New Zealand 5Labour and Labour relations in New Zealand
are governed by various legislation,
their members’ individual rights at
mediations and court proceedings.
Personnel the primary statute being the
Employment Relations Act
Employers cannot unreasonably
refuse union access, even for
2000. This Act places emphasis purposes of recruitment.
on collectivism, although union
membership is voluntary. The main 90-day trial period
features of the Act are:
Small employers (i.e. businesses
• Employers must comply with withA complying superannuation fund Further deductions from pay
is a section within a registered may be required to be withheld
superannuation scheme that has depending on the employee’s
been approved by the Financial circumstances (e.g. repayments of
Markets Authority as having met student loans).
certain criteria similar to KiwiSaver.
Employers are obligated to calculate Fringe benefits
ESCT on any employer cash
contributions made to a registered The fringe benefit regime is
superannuation scheme for an designed to impose tax on the
employee. employer in respect of non-cash
benefits provided to employees
KiwiSaver employer contributions by reason of past, present or
are paid with PAYE, while future employment. Fringe benefit
any contributions made to an tax (FBT) is generally payable in
employee’s complying funds will quarterly instalments by employers
still need to be paid directly to the on the value of fringe benefits
applicable scheme. provided to employees and
shareholder employees. The value of
It is worth noting that KiwiSaver fringe benefits is not included in the
schemes are managed by private employee’s gross income amount.
sector companies called KiwiSaver
providers, of which there are Employers with PAYE and ESCT
several to choose from. KiwiSaver deductions not in excess of
is therefore not guaranteed by the NZ$ 500,000 per annum can pay
government. FBT on an annual basis.
For more information about
Occupational health and safety
KiwiSaver, visit www.ird.govt.nz/
kiwisaver/employers/.
The main purpose of Health and
Safety at Work Act 2015 is to
Deductions from pay provide for a balanced framework
to secure the health and safety
Employers are required to withhold of workers in the workplace by
tax from wage and salary payments eliminating or minimising risks arising
and return this to the Inland from work, so protecting workers
Revenue Department (the PAYE and other persons against harm to
regime). The rate of withholding their health, safety and welfare.
depends upon the relevant
employee’s individual tax rate. The Employers have a general duty to
employer must also withhold the ensure workplace safety.
employee’s Accident Compensation
Corporation earners levy and The Act allows for premises to be
may be required to make other inspected and improvement and
withholdings. prohibition notices may be issued
to stop activities. Failure to comply
If the employee is a member of with the Act is a criminal offence,
a KiwiSaver retirement savings with fines of up to NZ$ 3 million
scheme, the employer will be and/or 5 years’ imprisonment.
required to withhold the employee’s
contribution (usually 3% of gross Workers’ compensation
pay) and will be required to make a
compulsory employer contribution Under New Zealand domestic
(a minimum 3% of the employee’s law, there is no right to sue for
gross pay).
www.morisonksi.com New Zealand 7damages for accidental injury. Sick leave
Instead, New Zealand’s Accident "Since 1 July 2018,
Compensation Corporation (ACC) For most employees, there is a government-funded
operates a comprehensive scheme minimum provision of 5 days’ paid
focusing on the needs of the injured sick leave a year after the first 6 paid parental leave
person. The system removes the months of continuous employment entitles primary
need to determine liability before and an additional 5 days’ sick leave
compensation is provided to after each subsequent 12-month caregivers to receive
accident victims. period. Exceptions are covered up to 22 weeks’ paid
under ‘The Effect of Various Work
Both employers and employees Patterns’ in the Holidays Act 2003.
leave. This will increase
are required to contribute to the to 26 weeks from 1 July
scheme, so as to cover work and New Zealand employers are entitled
non-work accidents. The employer’s to ask for proof of sickness or injury
2020"
account is funded by an annual levy at any time. If the employee has
imposed on the employers and self- been away from work forInternational Visa requirements if they do not meet any other
criteria for residence.
Mobility New Zealand has a reasonably
open-door immigration policy, Long-term business visa
particularly for skilled migrants and
for entrepreneurs with the resources Individuals wanting to establish their
and capital to contribute to the own business, or to buy a minimum
economy by setting up a business in 25% stake in an existing business,
New Zealand. can apply for a long-term business
visa or permit. As well as satisfying
If you are not a New Zealand/ English language, health and
Australian national, you will need a character requirements, applicants
visa to work in New Zealand. Visa must have:
types include:
• Sufficient funds to support their
• Temporary work visa business, themselves and their
family
• Long-term business visa
• A sound business plan, with
• Residence visa.
realistic financial forecasts, that
shows how the grant of the visa
Applicants for any visa must be of
will be of benefit to New Zealand
good character and hold a valid
by
passport that expires ≥3 months
after the proposed date of —— creating new employment
departure. opportunities;
—— saving a failed or failing
Temporary WORK VISA company;
Work visas are time-limited and —— improving exports; or
can be issued for a period of up to —— introducing new (or
3 years. To qualify, foreign nationals expanding on existing)
must have a job offer: business concepts,
technologies, services or
• For an occupation on the skills products.
shortage list; or
• Relevant business experience
• From a New Zealand employer or other expertise, including
who occupational registration where
—— is accredited or has approval appropriate
to recruit foreign workers; or • A good record: no business
—— can prove there are no failures in the previous 5 years,
suitable New Zealand and never any involvement in
applicants for the job. business fraud or wrongdoing.
An applicant may also be eligible The long-term business permit is
when coming here for a specific issued initially for 9 months, but will
purpose that will be of benefit to be extended to 3 years provided
New Zealand. the holder has started the business
within the initial visa period.
Employees of a business which is Two years after establishing the
relocating to New Zealand can also business, the applicant may begin
apply for a work permit and, later, an application for residence under
for residence under the ‘Employee the entrepreneur category.
of a Relocating Company’ category,
www.morisonksi.com New Zealand 9Residence visa
"Persons who have a
The main paths to New Zealand successful business
residence are through the following
categories: and who have decided
that they wish to
• Skilled migrant
live in New Zealand
• Investor
permanently can apply
• Entrepreneur
directly for a residence
• Family.
permit under the
Skilled migrant category entrepreneur category"
The skilled migrant category
operates on a points system with
Entrepreneur category
points awarded for qualifications,
work experience, age, whether the
Persons who have a successful
person has a job offer, and other
business and who have decided
settlement factors. In addition,
that they wish to live in New
applicants must satisfy health,
Zealand permanently can apply
character and English language
directly for a residence permit
proficiency standards. Only those
under the entrepreneur category.
who meet the appropriate criteria
This also requires a minimum
are invited to apply for residence.
capital investment of NZ $100,000
(excluding working capital) or
Investor category
NZ $500,000, depending on the
category applied for.
There are two investor categories:
Family category
• Investor 1 category (Investor Plus)
—— Requires an investment of Applicants may be able to apply
NZ$ 10 million for 3 years for residence based on their family
connections in New Zealand. The
—— No age restriction or English
main options are:
language requirement
—— Must stay in the country for • Partner: Living with a New
44 days in each of the last Zealand resident or citizen
2 years of a 3-year investment creates an opportunity to apply
period, or 88 days over the for residence on partnership
3-year investment period. grounds in some circumstances.
• Parent: The parents of a New
• Investor 2 category (Investor)
Zealand citizen or resident may
—— Requires an investment of be eligible to apply for residence
NZ$ 3 million for 4 years if they have an equal or greater
—— The applicant must be aged number of children livingTaxation Income tax is imposed under the
Income Tax Act 2007. Generally,
or not they have such an abode
outside New Zealand; or
System residents in New Zealand are
taxed on their worldwide income,
• are physically present in New
Zealand for >183 days in aggregate
with a credit available in most
within any 12-month period.
circumstances for foreign taxes
paid. Non-residents are only taxed
If an individual is resident in New
on income derived from a New
Zealand and is also a resident under
Zealand source, although the
the domestic laws of a country with
liability may be reduced under a
which New Zealand has a double
double taxation agreement.
tax agreement, the ‘tie-breaker’
provision in that agreement will
The tax year runs from 1 April to
determine where the individual
31 March. Taxpayers must apply to
is resident for the purposes of
the IRD for permission to adopt an
applying the agreement for the
alternative balance date.
relief of double taxation.
Income for tax purposes is widely
A 4-year domestic income tax
defined and includes business
exemption for foreign-sourced
trading profits and most forms of
income (excluding employment
return on investment. New Zealand
or services income) is available for
does not have a comprehensive
overseas individuals who become
capital gains tax regime (although
New Zealand tax residents (referred
note that a CGT regime is currently
to as the ‘transitional resident’
being considered and there is
exemption). The exemption does
a high probability this will be
not apply if the individual has been
brought into legislation in the
a New Zealand tax resident within
coming years). There are, however,
the last 10 years.
specific provisions that effectively
tax capital gains on certain
Current income tax rates for
transactions. These transactions
individuals are shown in Table 1.
include:
Table 1. Current income tax rates for
• Profits from the sale of land in individuals.
certain circumstances Tax
• Certain royalty payments Annual income bracket (NZ$) rate
0–14,000 10.5%
• Profits from the sale of any
14,001–48,000 17.15%
personal property acquired with
the purpose of sale or pursuant 48,001–70,000 30%
to a profit-making scheme >70,001 33%
• Gains from any ‘financial
arrangements’ (e.g. loans or Taxation of companies
deposits) under the accrual
regime. Companies are treated as New
Zealand tax residents if they meet
any of the following criteria:
Taxation of individuals
• They are incorporated in New
Individuals are resident in New
Zealand
Zealand for income tax purposes if
they • They have their head office
situated in New Zealand
• have a permanent place of • They have their centre of
abode in New Zealand, whether management in New Zealand
www.morisonksi.com New Zealand 11• Control of the company by their derived by the trustees will either
directors is exercised in New be ‘trustee income’ or ‘beneficiary
Zealand, whether or not decision- income’, depending on whether
making by their directors is or when it is distributed to a
confined to New Zealand. beneficiary. Trustee income is
taxed at 33%. Beneficiary income is
Similarly, tie-breaker provisions taxed at the recipient beneficiary’s
apply for the purpose of double tax marginal tax rate. However,
agreements. distributions to beneficiaries who
are minors are taxed at a 33% rate in
Currently, resident and non-resident most instances.
companies are subject to a flat tax
rate of 28%. Distributions to beneficiaries of
things other than beneficiary income
The dividend imputation system can also be subject to tax. This will
allows New Zealand resident depend on the classification of the
companies to pass on to their trust in relation to that distribution.
shareholders credits for the New For instance, if the trust is a ‘non-
Zealand income tax paid by the complying trust’, distributions of
company. The credits attach to accumulated trustee income and
dividends paid and taxable bonus capital gains to a beneficiary are
issues, including bonus shares in lieu. taxed at a rate of 45%. There are
complex rules to determine the
New Zealand-resident companies clarification of the trust and the
must maintain an imputation credit source of the distribution.
account. This is a memorandum
account that records tax paid and the Taxation of partnerships and
allocation of credits to shareholders.
limited partnerships
Where resident individual
shareholders receive dividends with
A partnership and limited
imputation credits attached, they
partnership are not in themselves
may offset these credits against
liable for income tax. However,
their personal tax liability. Resident
they are required to file a tax
corporate shareholders may also
return for information purposes.
offset credits against their tax
It is the individual partners in a
liability except where the dividend
partnership who will be taxed on
is exempt from income tax. Non-
their share of partnership income
resident shareholders cannot
at their individual tax rates. Losses
benefit from imputation credits
incurred by the partnership will
under the foreign investor tax credit
also be passed through directly to
regime, but can mitigate
partners. There are no restrictions
withholding tax on dividends.
based on residence and the number
of entitlements of the flow through
Most inter-company dividends are
tax treatment under the partnership
taxable. However, dividends may not
rules. However, limited partners
be taxable to a shareholder when
in limited partnerships can be
that shareholder is also a company
restricted with regard to the amount
and is a member of the same wholly
of losses they can utilise.
owned group of companies as the
payer of the dividends.
Goods and services tax
Taxation of trusts GST is a consumption tax imposed
on the supply of goods and
The trustees of a trust generally services in New Zealand, and on
are treated as a taxpayer. Income
www.morisonksi.com New Zealand 12imported goods. Although the tax Exempt supplies • GST imposed on imports.
is generally levied at the standard
rate (currently 15%), some supplies There are a limited number of The New Zealand Customs Service
are taxed at a nil rate (zero-rated) exemptions from GST: collects these duties. The rate of
and a small number of specified duty payable is determined by the
supplies are exempt from the tax. All • Financial and banking services classification of the goods under the
commodities, with the exception of (extensively defined) Customs and Excise Act 1996.
money, are subject to GST.
• Supplies by charities and other
non-profit organisations of Stamp duty
GST is not a tax on business profits
goods and services received as
or turnover but on consumption Stamp duty has been abolished in
donations
of goods and services, and is New Zealand since 20 May 2009.
ultimately paid by the consumer • Residential property rentals and
or end user. The tax is paid at each the associated sale or lease of
Estate duty
step along the chain of ownership, freehold or leasehold residential
until the goods or services reach the property
No estate or death duties are
end user. Registered businesses and
• Sale of precious metals, e.g. gold payable in New Zealand.
other organisations account for the
or silver as a commodity. The
GST they have collected, and claim
exemption does not apply to the Transfer pricing and thin
a credit for the GST on business
manufacture and sale of jewellery
inputs, including capital items such capitalisation
and other collectables.
as plant and equipment that they
have paid. Through the operation New Zealand’s transfer pricing rules
of this credit offset system, a net Gift duty attempt to protect the New Zealand
figure is returned by registered tax base by ensuring that cross-
entities in their GST returns that Gift duty was abolished from border transactions are priced on
must be lodged at monthly, 1 October 2011. an arm’s-length basis. New Zealand
2-monthly or 6-monthly intervals. also has thin capitalisation rules that
Businesses must register for GST Excise duty disallow certain interest deductions
where their annual turnover exceeds for a foreign-owned New Zealand
NZ$ 60,000. Excise duty, in addition to GST, group, depending on their debt/
is imposed on certain goods equity ratio.
Zero-rated supplies manufactured in New Zealand,
being beer, wine, alcohol, tobacco As with most other developed
As GST is confined to consumption products and fuels. countries, New Zealand has a
of goods and services in New comprehensive international tax
Zealand, certain export transactions Customs duty regime.
are zero-rated. Zero-rated supplies
include: Customs duty refers to a number of
imports, including:
• Exported goods
• Excise duty and excise-
• Supply of goods situated out of
equivalent duty payable on a
New Zealand
variety of goods such as alcohol
• Exported services such as and tobacco
international transportation
• Duty imposed on certain imports
and freight, services performed
under the Tariff Act 1988
outside New Zealand and certain
services supplied to non- • Anti-dumping and countervailing
residents. duties that can be imposed
where it is considered that
In addition, transactions involving goods are being ‘dumped’
land between two GST registered in New Zealand or they have
persons can generally be zero- been subsidised by a foreign
rated. government, respectively
www.morisonksi.com New Zealand 13Banking and Raising capital in New Zealand management role, which explains
why their return expectations are
Finance The most common types of funding
available for business development
higher (30–50% per annum) on
their investment.
and growth are summarised below. See www.vcapital.com.
• Personal equity, friends and Banking
family: A high proportion of
businesses are funded by the The bank manages monetary policy
business owner’s own equity to maintain price stability, promotes
(capital), i.e. savings and/or a the maintenance of a sound and
loan or mortgage raised against efficient financial system, and
the owner’s home. Further supplies New Zealand’s banknotes
capital can be raised from friends and coins.
and family. Personal equity can
also include the cash flow or All 26 banks operating in New
savings that have built up in a Zealand must be registered with the
business. While cost-effective Reserve Bank of New Zealand and
funding is available, this often are required by law to disclose their
takes an extended period of time financial condition each quarter. The
to build up. banks with the largest presence are:
• Banks are the second most
common source of funding for • ANZ Bank New Zealand Ltd
business development. This • ASB Bank Limited
funding can take various forms,
such as short-term funding • Bank of New Zealand
(for instance, an overdraft) to • Westpac New Zealand Limited
meet immediate commitments,
or longer-term funding for • Kiwibank Limited
capital items (such as plant and
machinery). Kiwibank Limited is owned and
operated through New Zealand’s
• Angel investors are people national postal operator, NZ Post.
prepared to invest in a promising
business venture, often at a The rest are owned by larger
relatively early stage of the Australian banks.
business life cycle. The investor
typically requires some equity The 21 other registered banks are:
(ownership) in the business to
offset their investment risk and • Australia and New Zealand
expects at least a 30% return on Banking Group*
their money.
See www.bizangels.co.nz or • Bank of Baroda (New Zealand)
www.angelassociation.co.nz. • Bank of China Limited*
• Venture capitalists are • Bank of China (New Zealand)
investment companies or fund
• Bank of India (New Zealand)
managers that provide cash in
return for part-ownership of a • China Construction Bank
business. They are typically only Corporation*
interested in investments that
• China Construction Bank (New
exceed NZ$ 1 million due to the
Zealand) Limited
time and cost associated with
due diligence procedures. They • Citibank NA*
may also expect to take an active
• Commonwealth Bank of Australia*
www.morisonksi.com New Zealand 14• Heartland Bank must, among other things,
have ≥50 shareholders. NZAX
• Industrial and Commercial Bank
also recommends that such
of China (New Zealand) Limited
companies have annual turnover
• JP Morgan Chase Bank* of between NZ$ 5 and 50 million.
• Kookmin Bank • New Zealand Debt Market
• Coöperatieve Rabobank U.A. (NZDX), for corporate and
trading as Rabobank Nederland* government bonds, fixed-income
and other debt securities.
• Rabobank New Zealand
• Southland Building Society The primary regulators of New
Zealand’s capital markets are the
• MUFG Bank, Ltd* Financial Markets Authority (FMA),
• The Co-operative Bank NZX and the Takeovers Panel.
• The Hongkong and Shanghai
Banking Corporation HSBC*
Regulation of foreign
investments in New Zealand
• TSB Bank Limited
• Westpac Banking Corporation* New Zealand’s regulations
governing foreign investment are
*Branches of overseas-incorporated liberal by international standards.
banks. There are no rules on the maximum
level of equity interest a foreign
Capital markets investor may take in a New Zealand
enterprise, except with respect
New Zealand has a small but well- to ownership of domestic fishing
developed capital market, on which quotas, Telecom and Air New
securities are actively traded. The Zealand.
New Zealand Exchange (NZX) is the
only registered securities exchange The Overseas Investment
and regulates three primary markets: Commission (OIC) is a statutory
body with responsibility for
• New Zealand Stock Market approving certain classes
(NZSX), the premier equities of investment proposals by
market for large and established prospective overseas investors.
enterprises. To list on the NZSX
market the company must, There are no restrictions on the
among other things, have an movement of funds in or out
appropriately qualified board of New Zealand, including the
of directors, ≥500 shareholders repatriation of profits. No additional
who hold ≥25% of the class of performance measures are imposed
securities between them, and on foreign-owned enterprises. An
comply fully with NZX disclosure application to the OIC must be
and other requirements. NZX made by non-residents planning to
also recommends that such invest more than NZ$ 100 million
companies have annual revenue establishing a business, or to
of at least NZ$ 50 million. purchase an equity share of >25%
in a New Zealand company worth
• New Zealand Alternative Market more than NZ$ 100 million. OIC
(NZAX), for fast-growing approval is also required to invest in
small and medium enterprises some land over 5 hectares, islands,
(SMEs) looking for additional and any foreshore or reserve land
sources of capital. To list on over 0.4 hectares.
the NZAX market the company
www.morisonksi.com New Zealand 15Clearance considerations for
acquisitions other than those of a "Foreign-owned
sensitive nature include: businesses should
• The prospective investor’s allow plenty of time
relevant business experience for the opening of a
• Confirmation that it is their own bank account, which
capital at risk
has become a slower
• Absence of a criminal record that
would disqualify the prospective and more complex
investor from obtaining process as a result of
permanent residence in New
Zealand.
legislation to combat
money laundering
It is rare for investment applications
and other banking
to be declined.
regulations"
The Fisheries Act 1996 contains
specific restrictions on overseas
investment in fishing. Only a net very wide, meaning that a large
resident may own a fishing quota number of entities will be captured
(entitlement to take fish). by this legislation.
Bank accounts If caught by the Act, entities need
to implement comprehensive
Foreign-owned businesses should policies and procedures to assess
allow plenty of time for the opening and cover potential risk. They
of a bank account, which has must demonstrate that they
become a slower and more complex are complying with the Act and
process as a result of legislation to regulations, and will need to
combat money laundering and other report to the relevant statutory
banking regulations. supervisors.
Legislation against money
laundering and the financing of
terrorism
New legislation to combat money
laundering and the financing
of terrorism took effect in New
Zealand on 30 June 2013. The Anti-
Money Laundering and Countering
Financing of Terrorism Act 2009,
a mouthful referred to as the
AML/CFT Act by most users, is
significant legislation that imposes
requirements on many different
types of entities.
This Act applies to ‘reporting
entities’, defined by the types of
transactions they undertake. The
type of transactions list has been
drafted very broadly and casts the
www.morisonksi.com New Zealand 16Reporting Reporting and audit
requirements
The Financial Reporting Act 2013 is
the umbrella legislation regarding
Requirements Under the Companies Act 1993
financial reporting requirements in
New Zealand. It defines generally
accepted accounting practice
and the Financial Reporting Act
as applicable financial reporting
2013, every company must keep
standards as issued by the external
accounting records that:
reporting board, the government’s
accounting, audit and assurance
• Correctly record and explain
standard setter.
company transactions
• Will at any time enable the Requirement to prepare
company’s financial position to
company financial statements
be determined with reasonable
accuracy
The requirement for companies to
• Will enable the directors prepare general-purpose financial
to ensure that the financial statements will apply to:
statements are prepared in
accordance with the provisions • Overseas company and New
of the Financial Reporting Act, Zealand subsidiaries of a body
2013 corporate incorporated outside
of New Zealand if the total
• Will enable the financial
assets of the company and its
statements to be readily and
subsidiaries were more than
properly audited for companies
NZ$ 20 million, or if total revenue
that are required to file financial
was more than NZ $10 million
statements annually with the
per year (assessed over the two
Companies Registrar.
preceding accounting periods)
Further provisions of the Companies • Some large companies that carry
Act specify particular types of on business in New Zealand.
accounting records to be kept; that ‘Large’ is defined as assets
they are to be kept in English, and exceeding NZ$ 60 million, or
retained for a period of ≥7 years revenue exceeding NZ$ 30
from the year they were filed. million (assessed over the two
preceding accounting periods)
Financial statements must be
• Companies with ≥10
supplied to shareholders at least
shareholders unless, through a
every calendar year and must
95% majority vote, the company
comply with statutory disclosure
opts out of compliance
requirements, including an
overriding requirement to: • Companies with• Parent entity financial statements Requirement to register
are not required if group financial company financial statements
statements are prepared
• In respect of the Companies Act, The registration requirement for
Section 211 required disclosures overseas companies is restricted
in annual reports; the threshold to large overseas companies and
has been reduced. Shareholders large companies with 25% overseas
who hold ≥95% of the voting ownership.
rights will be able to agree
to exclude information from In addition, any company that is a
the annual report; previously, subsidiary of an overseas entity,
unanimous agreement was and that is required to prepare
required. financial statements, must register
its financial statements.
Requirement to audit
Large overseas companies and large
company financial statements companies controlled by overseas
interests must provide a copy
The audit requirement applies
of their financial statements and
to the same companies as noted
auditor’s report to the Registrar of
above, and the same opt-in/ opt-out
Companies within 5 months of the
provisions apply.
balance date.
In addition:
Each year, every company must
file an annual return of directors,
• Large companies (other than
shareholders and other matters with
those that are required to register
the Registrar of Companies.
their financial statements) can
opt out of the audit requirement
through a 95% majority vote Other entities
• Audits must be carried out in Large partnerships
accordance with auditing and
assurance standards (but the Large partnerships must prepare
Registrar can recognise overseas financial information in accordance
standards) with GAAP. This information must
• An auditor is required to be be audited unless the partnership
appointed only if the financial opts out of compliance by passing a
statements or group financial resolution by partners who together
statements of the company are have contributed ≥95% of the
required to be audited. capital.
Auditors of companies are required Charities
to be chartered accountants holding
a valid certificate of public practice. Charities that have successfully
Auditors of FMC entities, essentially registered with the Charities
any entity offering debt or equity Commission are not subject to
securities to the general public, are income taxation in New Zealand.
required to be audited by a licensed They will be required to prepare
auditor from a registered audit firm. financial information in accordance
The licensing and firm registration is with GAAP, as appropriate for
regulated by the Financial Markets charities.
Authority.
The External Reporting Board
governs accounting standards for
www.morisonksi.com New Zealand 18the different tiers of Public Benefit Consumer protection
Entities (PBE), which will include
registered charities. These PBE In New Zealand, consumers are
accounting standards are based protected by two primary pieces
on International Public Sector of legislation: the Fair Trading Act
Accounting Standards and modified 1986, and the Consumer Guarantees
as appropriate for the New Zealand Act 1993. However, unlike some
environment and size of entity. countries, in New Zealand there is
no power to stop repeat offenders
Securities law from trading.
In New Zealand the Financial The Fair Trading Act 1986 aims
Markets Conduct Act 2013 to protect consumers against
(“FMC”) has a primary objective misleading or deceptive behaviour.
to facilitate capital market activity The Act is enforced by the
to help businesses grow, and Commerce Commission and gives
promote confident and informed consumers direct rights of action.
participation in the financial Anyone providing goods or services
markets. The FMC seeks to do needs to be aware of the Act.
this by changing the way in which
information on investment products The Consumer Guarantees Act 1993
is presented. ensures that certain guarantees are
in place around goods and services
Where an offer of securities is to protect New Zealand consumers.
‘regulated’ a product disclosure The Act also offers remedies
statement (“PDS”) must be (damages and the right to cancel a
prepared. The PDS is intended to contract) should goods and services
be a fairly streamlined document not live up to these guarantees.
focusing on the substance of the
investment rather than form. The It is worth noting that the Act does
FMC states when investments can not apply to dealings of a business-
be offered without a PDS, which to-business nature and that most
allows for a more limited disclosure commercial contracts specifically
of information to an investor. acknowledge this. The Act only
applies to persons buying goods
Competition law or services for the purposes of
household or domestic use.
The Commerce Act 1986 is the
key competition statute. It aims to
promote competition and prohibits:
• Agreements that have the
purpose or effect of substantially
lessening competition
• Price fixing
• Taking advantage of market
power to exclude competition
• Resale price maintenance
• Business acquisitions that
are likely to have the effect
of substantially lessening
competition.
www.morisonksi.com New Zealand 19Agencies There are many government
organisations in New Zealand that
New Zealand Story –
www.nzstory.govt.nz/
Providing seek to assist businesses to set up
and operate in New Zealand. For New Zealand exporters looking
Assistance New Zealand Trade and
for support in communicating their
distinctly kiwi attributes to the
Enterprise – world.
www.nzte.govt.nz/
Immigration New Zealand –
NZTE is New Zealan’’s international www.immigration.govt.nz/
business development agency. new-zealand-visas/options/
They exist for one purpose – to
grow your business internationally,
start-a-business-or-invest/i-
bigger, better, faster. want-to-invest-or-do-
business-in-nz.
Business.govt.nz –
Immigration New Zealand works
www.business.govt.nz/
with international organisations and
industry partners to improve border
Business.govt.nz makes it easier
security and make immigration
for small business in New Zealand
easier. They also lead government
to understand and comply with
strategy designed to help migrants
government, and succeed. They
settle in New Zealand.
do this by packaging content and
advice from across government
into tools and resources designed New Zealand Now –
with small business in mind. They www.newzealandnow.
work closely with small businesses govt.nz/investing-in-nz/
across New Zealand, government investment-options/starting-
agencies, and private sector
businesses and organisations, to
a-business
understand small-business pain
This resource contains information
points and how to address them in
to assist businesses on how to start
the most effective way.
up a business New Zealand.
Business.govt.nz is part of the
Ministry of Business, Innovation and New Zealand Companies
Employment (MBIE) and is focused Office –
on achieving the government’s www.companiesoffice.govt.
Better for Business objectives. nz/
Ministry of Business, A resource for those operating a
Innovation and Employment company. The Companies Office
– www.mbie.govt.nz/ website is used to incorporate
Companies and file of annual
The MBIE is the government’s returns. You can also search for
leading business-facing agency. New Zealand companies, directors
Its contribution to improving the and shareholders and view various
well-being of New Zealanders is incorporation documents.
summarised in its mission statement:
‘to grow New Zealand for all’. Investing in Auckland –
www.aucklandnz.com/
business-and-investment
www.morisonksi.com New Zealand 20An insight into Auckland, New
Zealand’s biggest city.
New Zealand Foreign Affairs
and Trade –
www.mfat.govt.nz/
MFAT negotiates and defends
access to overseas markets, and
helps our exporters to be successful
and contribute to international
solutions. MFAT contributes to
solutions for climate change, and
helps form global agreements
to protect fragile environments.
MFAT manages New Zealand
Development Assistance, which
invests in sustainable development
in the Pacific and beyond.
www.morisonksi.com New Zealand 21Grants and New Zealand Trade and Enterprise
(NZTE) is the government
Incentives department responsible for helping
New Zealand businesses grow
and compete internationally via a
range of services, programmes and
information.
• NZTE Capability Development
Vouchers can be used to access
subsidised services (up to 50%)
that will help build management
capability within the business,
which in turn may accelerate the
growth of your business. These
services are primarily delivered
through one-on-one coaching or
workshops.
• Ministry of Science and
Innovation (MSI) Research and
Development. Business R&D is a
key driver of innovation, business
success and economic growth.
Therefore a range of MSI services
are available to help businesses
grow through all stages of
R&D. Funding can range from
NZ$ 1,000 to over NZ$ 1 million.
• Industry Capability Network
(ICN). The Industry Capability
Network (ICN) exists to help local
businesses get involved with
major projects in New Zealand
and Australia. ICN New Zealand
also helps the New Zealand
businesses it works with to
become more capable and build
relationships that will take them
into other international markets.
• The Manufacturing+ Programme
offers selected high-growth
businesses the opportunity to
participate in Manufacturing+
workshops to help them
achieve peak performance.
Some businesses may also be
eligible for more intensive in-
house training sessions to help
them embed Manufacturing+
principles into their business.
For more information on NZTE
and how they assist New Zealand
businesses, visit www.nzte.govt.nz.
www.morisonksi.com New Zealand 22You can also read
