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New Zealand: Country and Foreign Investment

Executive Summary

New Zealand is a remote island country in the south-western Pacific, situated about 2,000 km south-east of Australia across the Tasman Sea. The country mainly comprises two islands – the North and South islands. Its population is around 4.25m.

New Zealand is a parliamentary democracy and a British Commonwealth realm. The chief of state is the British Monarch. John Key has been the Prime Minister since the November 2008 general election.

Previously, New Zealand based its economy on the export of meat and dairy products to the United Kingdom. However, since Britain's membership of the European Union, New Zealand has diversified. Agriculture now represents only 4.9% of gross domestic product (GDP), with the economy being dominated by services at 71.6% of GDP, and manufacturing at some 23.5%. Tourism has become an important part of the country’s economy, with most of the country’s visitors originating from Australia, Japan, the United States, and the United Kingdom.

GDP has reached USD123.7bn (2011 estimate), and per capita GDP averages USD28,000. GDP growth was 1.3% in 2011, in 2010 it was an estimated 1.8% while in 2009 GDP contracted by an estimated 2.4%.

Its currency is the New Zealand dollar (NZD), known informally as the “kiwi dollar”.

The rate of company tax in New Zealand since the 2011 is 28% (30% previously), while the top personal income tax rate is 33%. There are no capital gains, inheritance or property taxes.

In 2010, the government changed the controlled foreign company (CFC) rules, introducing an exemption for active income earned by those foreign companies that are controlled by New Zealand investors, and is also considering similarly modifying the foreign investment fund rules. However, investment income is still taxable, limiting the use of New Zealand as a regional headquarters (without the use of double taxation treaties).

After the boom years from 2001, property prices fell by almost 5% in 2008. However, with low interest rates and a large government stimulus to counteract the global recession, prices began to recover in 2009. The government has removed controls over banking and finance, and is looking at making the country a hub for investment fund administration in the region.

While there are no major tax incentives for particular sectors, non-tax incentives are available for investments in selected sectors, such as venture capital and film production, provided directly by the government in the form of financial support.

 

 

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