Doing Business in New Zealand
By Mary Swire, Hong Kong
Corporate
Taxation
A
company is deemed to be
tax resident in New Zealand
if it is incorporated in
New Zealand, or if its head
office or centre of management
is in New Zealand, or if
control of the company by
its directors (or persons
acting in that capacity)
is exercised in New Zealand.
A
non-resident company will
be taxable if it has a permanent
establishment, defined to
include an office, a factory,
a workshop, a mine or equivalent,
a building or construction
site, or if it is significantly
involved in supervisory
or managerial activity in
the country. No permanent
establishment is created
by the storage, display
or delivery of goods and
merchandise or the maintenance
of a fixed place of business
for such purposes.
Resident
companies are taxed on world-wide
income from all sources,
at a corporate taxation
rate of 30%. Non-resident
companies are taxed only
on New Zealand-sourced income.
In
New Zealand, regional or
local governments do not
impose additional corporate
taxes. However, companies
are also liable to pay Goods
and Services Tax (similar
to VAT), currently at 12.5%,
and there are municipal
property taxes, known as
rates.
Types of Company
In
New Zealand,
the most fequently used
corporate form is the Limited
Liability Company. Partnerships
are also commonly used,
either General or Limited.
Foreign companies frequently
operate through branches.
Formation
of a limited company is
quick and easy in New Zealand.
There is a public company
register which holds information
about the company, including
the names of the directors
and the company's registered
address. There must be
at least one shareholder,
at least one share, and
at least one director, who
can be the same as the sole
shareholder.
The
New Zealand subsidiary of
a foreign company must have
an address for service in
New Zealand but is not required
to have New Zealand directors.
Annual
accounts have to be filed
with the registrar, but
if a company has more than
25% or more foreign ownership
it only has to file financial
statements if it has total
assets greater than NZD10,000,000,
turnover greater than NZD20,000,000,
or 50 or more full time
employess.
The registration fee for
a company is NZD100, with
ongoing annual return fees
of NZD30. Shelf companies
are available.
Under the Companies Act,
the branch of a foreign
company must register within
10 working days of starting
to carry on business within
New Zealand (this is not
defined by statute law).
There is a fine of up to
NZD10,000 for failure to
register.
Restrictions
on Foreign Investment
There
are no foreign exchange
controls in New Zealand.
Foreign direct investment
in New Zealand is welcomed.
There are certain controls
which are in the hands of
the Overseas Investment
Office (OIO), particularly
as regards significant purchases
of land. Government approval
is required for purchases
of land in excess of 5 hectares
(12.35 acres) and land in
certain sensitive or protected
areas. Government approval
is required for non-land
business investments of
NZD100 million or more.
These approvals are normally
given readily, but the OIO
monitors foreign investments
after approval.
Permits
are required for mining
operations under the Crown
Minerals Act 1991, and also
from the Minister of Conservation
in the case of public land.
Resource consents for land
or water use may have to
be obtained from the relevant
municipality.
Federal
Investment Incentives
There are attractive incentives
in the venture
capital sector and in
forestry.
These are described separately.
The
2008 tax package which reduced
the coporate tax rate from
33% to 30% also introduced
a 15% tax credit for research
and devlopment expenditure.
To qualify for the credit,
a business must control
the R&D project, bear
the financial and technical
risks of it, and own the
project results. The R&D
must be carried out predominantly
in New Zealand. R&D
credits will be paid out
in cash to loss-making businesses
such as start-ups.
Expenditure
eligible for the tax credit
includes the cost of employee
remuneration, the depreciation
of tangible assets used
primarily in conducting
R&D, overhead costs,
and the costs of consumables
and payments to entities
conducting R&D on behalf
of the business.
Non-tax
incentives are available
for investments in activities
that encourage export
expansion, regional development
and employment. These are
provided directly by the
government in the form of
financial support.
Is
New Zealand an Attractive
Location For Multi-Nationals?
The
high standard of living,
modern telecommunications
and transport networks,
wide variety of investment
opportunities, and generally
very well educated and trained
workforce, added to the
fact that New Zealand is
in a very favourable position
to access emerging Asian
markets, all contribute
towards making New Zealand
potentially a very rewarding
place in which to do business.
However,
on the down side, the corporate
taxation rate is still comparatively
high, even after a recent
reduction, and the Controlled
Foreign Company and Foreign
Investment Fund rules are
quite restrictive (the assessable
income of Australian resident
companies includes passive
income from non-resident
entities, even if that income
is not remitted to Australia).
|