Doing business in New Zealand - A GUIDE FOR INVESTORS July 2021 - Chapman Tripp
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Doing business in New Zealand A G U I D E FO R I N V E S TO RS July 2021
Contents
1 About Chapman Tripp
19 Taxation within New Zealand
37 Financial services
in New Zealand
2 New Zealand at a glance
22 New Zealand’s cross-
border tax regime
42 Investing in New Zealand’s
capital markets
4 Overseas investment
in New Zealand
25 Contract law in New Zealand
44 Fundraising in New Zealand
7 Establishing a business
in New Zealand 26 Consumer protections
in New Zealand
46 Insolvency in New Zealand
9 Buying and developing real
estate in New Zealand 29 Employment and health and
safety law in New Zealand 48 Resolving disputes
in New Zealand
14 Environment and
resource management
law in New Zealand
32 Anti-trust, competition
law in New Zealand 50 Emigrating to New Zealand
17 New Zealand Māori and
the Treaty of Waitangi
34 Intellectual property
in New Zealand
We make every effort to ensure the accuracy of the information provided but it should not be relied upon as a basis for making
business decisions as circumstances, business conditions, government policy and interpretation of the law may change.
About Chapman Tripp
Chapman Tripp, New Zealand’s leading law firm, can offer you a national, full-service team.
Established in 1876, we have a reputation for excellence and a long track record of delivering
innovative, commercial solutions which respond to the individual needs of our clients.
“
Our advice is clear and
commercial. We help
you mitigate risk and
Our advice is clear and commercial.
We help you mitigate risk and maximise
Chapman Tripp has an international
client base and has been involved in
This guide is designed to provide
the prospective investor with an
maximise your investment
your investment through all phases of some of the most high profile Overseas introduction to New Zealand’s legal through all phases of your
your business venture – from evaluating Investment Office applications of framework. The information is accurate
business venture.
”
potential investment opportunities recent times. We play a key role in at the time of publication but is
and acting on acquisitions through to mergers and acquisitions, banking, necessarily high level and generic, so
advising on the most efficient way to financing, insolvency, restructuring, should not be relied upon as a basis for
structure your business, the day-to- procurement processes, large decision-making.
day operational issues you need to be scale infrastructure projects and
aware of and, should it eventuate, how dispute resolution. We recommend you speak to us about
to achieve a successful exit strategy. your investment requirements before
We have 55 partners and around 450 making any decisions – so that we can
We also help you to make sense of the staff with offices in Auckland (the provide you with advice that is specific
New Zealand regulatory and cultural economic centre of New Zealand to your needs. Chambers NZ Law Firm
environment. We will represent your and home to more than a third of the
business interests to relevant regulatory population), Wellington (the seat of You can read more about our firm at of the Year
bodies, including the Overseas government) and Christchurch (the chapmantripp.com Chambers 2021
Investment Office, and will guide you South Island’s commercial hub).
through the resource management
consent process and the best approach New Zealand Deal Firm
for dealing with Māori law. of the Year
Australasian Law Awards 2021
New Zealand Law Firm
of the Year
KangaNews Awards 2020
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 1
New Zealand Geography Culture Economy
New Zealand is situated in the South New Zealand culture values fairness, New Zealand is a safe place to invest
at a glance Pacific Ocean, with a land area
equivalent to Japan or Britain. We have
ingenuity, practicality, modesty,
restraint and informality. English is
and is currently ranked first of 190
countries by the World Bank for ease of
one of the largest exclusive economic the everyday language but Māori and doing business.
zones in the world at 4.1 million sign language are also recognised as
square kilometres. official languages. Major exports include dairy products,
meat, timber and minerals. We
New Zealand consists of two main We aspire to be a multi-cultural society also have developing industries in
islands – the North Island and the South but accord a special significance to export education, boat building, IT,
Island. It has a temperate climate and Māori culture, reflecting that Māori are horticulture, wine and film.
offers a high quality of life with clean air the indigenous people of this land.
and easy access to nature. Our stock exchange is the first in the
world to open trading each day – two
Political and legal system hours ahead of Sydney, three hours
Population ahead of Tokyo, four hours ahead of
New Zealand is consistently rated in the Beijing, 12 hours ahead of London and
The resident population is just over top four by Transparency International 17 hours ahead of New York.
five million, one third of whom live for freedom from corruption. We
in Auckland. have a common law legal system
The currency is based on the
based on the British model, with an
New Zealand dollar, which is freely
New Zealand is a nation of migrants, independent judiciary.
floated against all major currencies.
with one of the most ethnically diverse
populations in the world and a large New Zealand has a stable parliamentary
“ex-pat” community that provides democracy with a proportional voting Free trade agreements
important international linkages. system which usually (but not always)
produces coalition governments. New Zealand supports trade
The two major parties, which would liberalisation and is party to a large
generally lead a coalition government, number of free trade agreements,
are National at the conservative end of including with Australia, China,
the spectrum and Labour at the liberal Hong Kong, Chinese Taipei, South
end. Korea, ASEAN, Singapore, Thailand,
Malaysia, Brunei and Chile. We are also
Currently, we have a Labour signatories to the Comprehensive and
Government that includes two Ministers Progressive Trans-Pacific Partnership
outside Cabinet from the Green Party. and to the Regional Comprehensive
Economic Partnership (RCEP).
The British sovereign is the titular
Head of State and is represented in
New Zealand by a Governor-General.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 2
Information on New Zealand’s international trading agreements can be found on the Ministry of Foreign Affairs and Trade website: mfat.govt.nz ALERT Want to know more? Go to: newzealand.com or newzealandnow.govt.nz/investing-in-nz or nzte.govt.nz/en/invest/ “ New Zealand currently rates number two by Transparency International for freedom from corruption. ” Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME
Overseas Key points When is consent
required?
Residential land
• New Zealand recognises the positive The sale of residential property,
investment in economic and social contribution
foreign investment brings to
Overseas Investment Office (OIO)
including lifestyle blocks and unit titles,
is restricted to:
consent may be required if the target
New Zealand •
New Zealanders.
New Zealand consistently ranks
business possesses any of the following:
• New Zealand citizens and persons
“ordinarily resident in New Zealand”
highly as an attractive investment • significant business assets – where
(which, in this context, means
destination, with various studies the cost of a business acquisition,
holding a permanent resident visa,
identifying the ease of doing or the value of the applicable
having resided in New Zealand for at
business, low level of corruption, New Zealand assets, exceeds
least a year and having been present
high quality of regulations NZ$100 million. Non-government
in New Zealand for at least 183 days
adherence to the rule of law, investors from all Comprehensive
in the past year)
significant investor protections, and Progressive Trans-Pacific
and protection of personal Partnership (CPTPP Agreement) • individuals who obtain consent on
freedoms accorded to investors countries have a higher threshold the basis that they are acquiring
in New Zealand. and Australia has a special a home to live in and have made
arrangement under the CER a commitment to reside in
• Not all overseas investments into
Investment Protocol) New Zealand, and
New Zealand require consent,
or notification. Like most other • an interest in sensitive land, or • investors who can demonstrate
countries, however, New Zealand through obtaining OIO consent
does require overseas persons • fishing quota.
that they will be developing the
to obtain consent for, or to notify land and adding to New Zealand’s
certain types of investments. housing supply, or using the land
ALERT for a non-residential use or for a
The definition of sensitive land is residential use that is incidental to
very detailed and requires careful the investor’s core business.
checking and analysis from qualified
advisers. In particular, land may
be “sensitive” if it adjoins certain Exemptions are available for
types of land, or is “associated” with Australians and Singaporeans under
other land already controlled by an New Zealand’s treaty obligations with
overseas person. these jurisdictions.
Tessa Baker – Partner
T: +64 9 357 9502
M: +64 27 622 3161
E: tessa.baker@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 4
Consent criteria Sensitive land To obtain consent, the overseas investor will need to demonstrate that the purchase will bring benefits additional to
those which would accrue from continued New Zealand ownership. These benefits are assessed against a variety
In general, all applicants (including persons of economic, social and conservation factors. All residential land, including “lifestyle,” is included in the sensitive
with control of the applicant if the applicant land category.
is an entity) are required to meet a bright
line investor test comprising a closed list of Rural land For non-urban land larger than five hectares, the overseas investor will need to show that the benefits to New Zealand
character and capability factors. arising from the investment are “substantial and identifiable”, with particular focus on economic benefits including
employment, new technology and business skills, increased exports and processing of primary products and local
The character factors include: oversight and participation. The type and level of benefits required mean it is difficult for an overseas investor to obtain
consent to buy rural land without substantial enhancements proposed.
• convictions resulting in imprisonment
• corporate fines both in New Zealand Special land Special land includes the foreshore, seabed, riverbed or lakebed that forms part of sensitive land.
and overseas, and Special land transfers are subject to stricter conditions and the part of the sensitive land that is special land must be
• being ineligible to come to offered to the New Zealand Government as a part of the OIO consent application process.
New Zealand.
Farm land Farm land must be offered on the open market before a sale to an overseas person can be completed.
The capability factors include: Exemptions from this requirement can be obtained, but only in special circumstances and at the discretion of the
• prohibitions on being a director relevant Minister.
promotor, or manager of a company Residential For transactions involving residential land (which is not otherwise sensitive), the overseas investor will need either to
• penalties for tax avoidance or land satisfy the benefit to New Zealand criteria or one of four alternative tests: a commitment to reside in New Zealand,
evasion, and increased housing supply, non-residential use or incidental residential use.
• unpaid tax of NZ$5 million or more.
Leases Leasehold interests in sensitive land for a remaining term of more than three years including renewals (increasing to 10
A national interest assessment may years from 5 July 2021) will require consent.
be applied to transactions involving
strategically important businesses, an Forest land Overseas investors wanting to buy forest land – being land over five hectares devoted principally to forestry – will need
overseas government investor or an to satisfy either the benefit to New Zealand criteria or one of two alternative streamlined tests: the special forestry test
area of specific national interest. This or the modified benefits test, both of which also involve replanting after harvest. The OIA also covers the acquisition of
assessment, which is intended to be forestry rights over 1,000 hectares per annum.
used rarely, will make sure that overseas
investments in sensitive and high-risk Strategically Transactions involving a strategically important business (such as military or dual-use technology, ports or airports,
assets are not contrary to important electricity, water, telecommunications, and financial market infrastructure) are subject to a national interest assessment
New Zealand’s national interests. infrastructure taking into account a range of factors, the importance of which can vary depending on the investment.
Certain investments have additional
criteria that must be met for consent to
be granted (see the following table). We
recommend you check with a qualified
adviser on these requirements.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 5
Off-shore transactions We recommend that potential investors Class exemptions The Government passed amendments
engage New Zealand legal counsel early to the Act aimed at making the regime
Transactions occurring outside The requirements for consent do not
in the investment process to assess easier to use and more facilitative of
New Zealand may still require OIO apply to certain situations covered by
whether consent is needed and to productive investment that supports
consent if the target business has class exemptions including:
ensure that there are no unnecessary New Zealand’s wellbeing. Certain
interests in land or other assets in
delays. An application for consent can legislative changes will commence on 5
New Zealand. OIO implications for off- • transfers within 95% wholly owned
require preparing a large amount of July 2021 with the balance coming into
shore transactions should be assessed groups
information on the investor and the force before June 2022.
early in the transaction process to
plans for the investment. • where there is no increase in
ensure that OIO timeframes do not
ultimate overseas ownership and
cause unnecessary delays.
Target processing times can be found at control
linz.govt.nz.
Consent application process • acquisition of redeemable
preference shares
The consent application process is
administered by the OIO and governed ALERT • security arrangements in the
by the Overseas Investment Act 2005 Complex applications can take ordinary course of business that
(the Act) and accompanying regulations. longer than the OIO targets. We secure payment or performance of
can advise you of likely application an obligation, and
The overall consent decision rests processing times when preparing
specific applications. • underwriting of an issue of securities
with the relevant Ministers. The OIO
in the ordinary course of business,
assesses the consent applications,
provided that the position is held
and makes recommendations to the
Consent conditions for less than six months and voting
Ministers. For certain applications the
rights are not exercised.
OIO itself makes consent decisions Consent will be granted subject to
under delegated authority from the various conditions with which the
Ministers. National interest assessments applicant must comply and against
are made by the Minister of Finance and which applicants must report. Often
are not delegated. the conditions will reflect the nature
of the benefits claimed to support the
transaction in the consent application.
Standard conditions include a
requirement to dispose of the interest if
consent conditions are not met.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 6
Establishing Key points Establishing a
New Zealand
ALERT
We can assist and put you in touch
• Overseas persons can own with providers of professional
a business in assets and operate businesses in
New Zealand.
subsidiary company director and registered office
services in New Zealand.
New Zealand • It is relatively easy and free of
restrictions to set up a company in
A New Zealand company is a separate
legal entity responsible for its own
Establishing a limited
New Zealand. assets and liabilities. There is no
• Overseas companies and limited
restriction on the size of a company’s partnership
share capital. There are no residency
partnerships which intend to carry restrictions on shareholders. The rules governing limited partnerships in
on business in New Zealand need
New Zealand are similar to those applying
to register with the New Zealand Key points to note in other jurisdictions, including Delaware,
Companies Office.
• Every New Zealand company Australia and the Channel Islands.
requires at least one New Zealand The distinctive feature of the limited
• Overseas entities will need to
resident director or one Australian partnership model is that it is a separate
obtain a New Zealand tax number
resident director who is also a legal entity but provides the protections
and, depending on the volume of
director of an Australian company. of limited liability to its members.
business, may be required to register
for the Goods and Services Tax. As long as this requirement is
fulfilled, a New Zealand company A limited partnership must have at
may have any number of least one general partner and one
ALERT overseas directors. limited partner, who cannot be the
Unlike other countries, the same person. A general partner may
Companies Register maintained • There is no requirement for a company be an overseas company registered in
by the New Zealand Companies to have a company secretary. New Zealand with at least one director
Office is publicly available, • The Companies Office may require who lives in New Zealand or who lives
including information regarding a certified proof of identity (e.g. in Australia and is a director of an
directors and shareholders, such Australian company. A general partner
passport) and a certified proof of
as their residential address and full is jointly and severally liable with the
legal name. residential address (e.g. utilities
bill) for overseas directors when limited partnership and any other
registering a company. general partners for the unpaid debts
and liabilities of the limited partnership.
• Every New Zealand company
requires a New Zealand registered A limited partner has the protection of
office address/address for service. limited liability, but must not take any
part in the management of the limited
partnership. A limited partner can be an
Tim Tubman – Partner overseas person.
T: +64 9 357 9076
M: +64 27 344 2178
E: tim.tubman@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 7
Entering a joint venture/ Branch, subsidiary or limited partnership?
general partnership There are advantages to each of the three options, depending on the circumstances.
Joint ventures for a particular
project can be carried out by a Branch Subsidiary Limited partnership
company, a limited partnership
or an unincorporated contractual Liability Because the branch is legally the A special purpose subsidiary may The general partner (which may
joint venture. overseas company, there is no help ring-fence liability. But in be a company) manages the
sheltering of liability. practice, unless the subsidiary is business and can be liable for any
A general partnership is not a separate substantial in its own right, any debts and obligations which the
legal person and each partner is jointly significant commercial dealings limited partnership itself is unable
and severally liable for the debts of may need to be guaranteed by the to meet. The limited partners are
the partnership. Responsibilities and overseas parent. passive investors and their liability
liabilities can be allocated according is limited to the amount of capital
to a partnership deed, but partners they agree to contribute.
do not enjoy the protection of limited
Tax The branch will generally be The subsidiary is a New Zealand Limited partners are treated as
liability. For this reason, some investors
considered to be non-resident for tax resident and will be subject holding the assets of the limited
prefer to pursue joint ventures through
tax purposes, with the effect that to New Zealand tax on the partnership and personally derive
a special purpose vehicle company or the overseas company will have to subsidiary’s worldwide income. the income and deductions. This
limited partnership. pay any tax obligations incurred in Losses cannot be offset against enables them to distribute capital
New Zealand but may also be able any income of the overseas gains among themselves tax free
Establishing a new business may be to include the branch activities parent and cannot usually and to pass through tax losses
subject to the Overseas Investment in the tax return filed in the home be claimed in the parent’s (although only to the extent of
Act (see the Investing in New Zealand jurisdiction of the head office. home jurisdiction. that limited partner’s exposure to
section for more detail). the loss).
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 8Buying and Key points Registered title system Forms of title
• All titles in New Zealand are New Zealand uses the Torrens land In New Zealand there are three main
developing registered at Land Information
New Zealand. “Freehold” title is
registration system under which most
parcels of land have their own titles
forms of title.
real estate in the most common. Particular care
needs to be taken when dealing with
“leasehold” or “unit title” properties.
showing dimensions and location,
ownership and other interests affecting
the land. The government guarantees
Freehold – this is the most common
(and best) form of title available in
New Zealand.
New Zealand • When purchasing property in
New Zealand, it is usual to sign a
the accuracy of titles, which can be
searched by the public for a nominal fee. Leasehold – the purchaser of a
leasehold property acquires the
sale and purchase agreement that
Chapman Tripp provides a full title benefit of a lease of the property (as
is conditional upon the purchaser
searching service. opposed to the freehold). Leasehold
carrying out a due diligence
title is particularly prevalent within the
investigation and being satisfied with
The primary attraction of the Torrens Auckland waterfront area. The term and
the results of that investigation.
system is that dealings can be rental structure of these leases can
• Overseas investors need conducted in reliance on a single title, vary significantly. Particular care needs
government consent under the rather than on a succession of title to be taken when acquiring leasehold
Overseas Investment Act to buy deeds. New Zealand has converted property, especially when the lease
“sensitive” land (which includes almost all titles, plans and instruments reserves an annual rent that is subject
farm land and residential land) into an electronic format, allowing to review under the terms of the lease.
or any other property where the real-time searching and electronic
consideration is over NZ$100 registration of all land title and
million. See the Investing in New surveying transactions.
Zealand section for more detail.
Under New Zealand law, buildings
and other improvements permanently
attached to the land form part of the
land itself and pass with ownership of
the land, unless the seller and buyer
agree otherwise.
Dealings with land are registered
electronically against the title.
Mark Nicholson – Partner
T: +64 9 357 9297
M: +64 27 305 9120
E: mark.nicholson@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 9Unit Title – unit titles are similar freehold but it is not uncommon to Act 2010, with a particular focus on to provide the purchaser with a pre- to other forms of title save that find leasehold unit titles within the the management and maintenance of contract disclosure statement which they are limited to a defined part Auckland waterfront area. A purchaser common property (such as lobbies contains information on the unit title of a building or property. They are of a unit title property automatically and lifts) and the structural elements being purchased (including the amount the most common form of title for becomes a member of the “body of the building as well as common of the “levies” payable to the body apartment buildings (with each corporate”. The body corporate building services. Before entering corporate to cover the cost of the individual apartment comprising a effectively governs the building into an agreement to purchase a unit insurance of the building as well as its single unit title). Most unit titles are under the terms of the Unit Titles title property, the vendor is obliged management and maintenance). Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 10
Contracts for sale and Due diligence • any relevant records held by the Seismic rating of
purchase of land Due diligence is a fundamental
council regarding the property commercial buildings
(for example the existence of any
component of the process of acquiring contamination or geotechnical
To be enforceable under New Zealand As a result of the Christchurch
property in New Zealand. Depending
law, a contract for the sale and issues or whether the building earthquakes of 2010 and 2011,
on the nature of the property being
purchase of land must be in writing has been identified as purchasers of commercial buildings will
acquired, due diligence commonly
and signed by the parties involved or “earthquake prone”), and now usually include the seismic rating
entails engaging a lawyer to review:
their authorised agents. Once signed, of those buildings as part of their due
an agreement for sale and purchase • any rates arrears. diligence investigation.
• the title to the property and (in the
becomes legally binding on all parties. In addition, you will need:
case of commercial property) the
All new buildings in New Zealand
terms of any leases
Sale and purchase agreements can be • a registered valuer to undertake a are required to be constructed to
made subject to conditions which are • council records for the property in valuation of the property, and 100% of the current building code
designed to protect either the seller the form of a “LIM” report to identify (often referred to as “New Building
the following types of issues: • a building inspector/engineer
or the buyer. Common conditions are Standards” or “NBS”). However, older
to review the condition of the
the buyer raising finance and the buyer buildings are unlikely to have been
• any enforcement action being building and identify any defects or
being satisfied with the results of the constructed to 100% of NBS, either
taken by the council for non- maintenance issues (see also the
due diligence investigation (see below). because of the lower building standards
compliance with statutory or comments below about the “seismic
applying at the time the building was
regulatory requirements rating” of commercial buildings).
You should always obtain legal advice constructed or because of poor design
before entering into a sale and purchase or workmanship.
• any outstanding code compliance
agreement. However, particular care
certificates in respect of any
needs to be taken before entering into
an agreement to purchase: building work undertaken at the ALERT
property (see section below on An older building with a seismic
• a commercial property (which, building works) rating of less than 34% of NBS
depending on size and value, may is classified as “earthquake
• the existence of a building prone” and will be subject to
be subject to fairly significant legal
negotiation), or warrant of fitness which is statutory requirements for seismic
required for most buildings other strengthening works. Particular care
• a residential property that is to be than stand-alone houses (see needs to be taken with heritage
developed by the vendor (commonly buildings and buildings constructed
section below on building works)
referred to as buying property “off before 1976, which are more likely to
the plans”). be earthquake prone.
Where a real estate agent is engaged
by a seller to effect a sale, commission
is payable by the seller. There is no
stamp duty.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 11Typically, most investors in commercial
property in New Zealand look for a
Residential property Residential Land Withholding Tax
(RLWT) applies where the seller is an
Resource
seismic rating of at least 67% of NBS. – tax considerations offshore person and the residential land Management Act
A rating of less than 67% can have an is sold within the relevant “bright-line”
impact on the value of the property Gains from the sale of residential period. RLWT also applies to sales by The Resource Management Act 1991 is
and also the ability to attract or retain properties purchased: New Zealand entities that are ultimately New Zealand’s principal statute relating
tenants. Most major corporates in more than 25% owned or controlled by to the use of land, water, minerals,
• on or after 27 March 2021 and held for
New Zealand will refuse to lease offshore persons. (For more detail, refer the coast, air and physical resources.
property in New Zealand if it has a less than 10 years, or to the section on New Zealand’s cross- The Act has major implications for
seismic rating of less than 67%. • between 29 March 2018 and 26 March border tax regime.) all property developments, be they
commercial, industrial or residential
2021 and held for less than five years
There are two main types of report Residents must provide an IRD number in nature, and for infrastructure and
issued by engineers to assess the are taxed at the owner’s standard as part of the usual Land Information utilities. A new development may
seismic rating of a building: income tax rate under the “bright-line New Zealand transfer process. require a number of consents under the
test”. The Government has announced Non-residents must also provide a Act before it can go ahead.
that “new build” residential properties New Zealand IRD number as well as a
• an “ISA” (or “Initial Seismic
acquired on or after 27 March 2021 will
Assessment”), a very high level home jurisdiction tax number together Controls on property development
be subject to a shorter five year “bright-
desktop study that is not always line” period, however legislation to with another form of identification – are administered by local government
accurate and should be treated with achieve this has not yet been introduced such as a passport. In order to obtain authorities and are expressed through a
caution, and (although it is expected to apply an IRD number, a non-resident will range of publicly notified plans. These
retrospectively once enacted). need a fully functional New Zealand include regional plans, district plans,
• a “DSA” (or “Detailed Seismic bank account or confirmation from and some national level plans. Plans
Assessment”) which is usually more Exemptions will apply if the property is: a New Zealand reporting entity that set out rules for activities depending
accurate but will generally cost customer due diligence has been on the nature, scale and location – for
more than an ISA. However, care • the seller’s main home completed in accordance with most developments above a certain
still needs to be taken to review the • inherited from a deceased estate New Zealand anti-money laundering size this includes the requirement to
report to identify any limitations (AML) legislation. obtain resource consent. At the district
• sold as part of a level, these rules are largely based
on the scope of the investigations
relationship breakdown. on the zoning of the relevant land.
undertaken by the engineer.
Parties seeking consent to proceed
Gain from sale of a property held for with a development must follow the
If the engineer’s report was obtained longer than five years or 10 years may
by the vendor, the purchaser should procedures set out in the relevant plan.
still be taxed if the Inland Revenue
consider requiring either that the Department (IRD) considers that the This may involve public participation in
engineer confirm in writing that the seller acquired the property for a purpose the resource consent process, through
purchaser may rely on the report or or intention of resale, or if one or more notification of the consent application.
that the report be re-addressed to of the specific land taxation provisions
the purchaser. applies (for example, if the seller carried
on, or was associated with someone who
carried on, a business of land dealing,
land development or building at the time
of acquiring the property and sells that
property within 10 years).
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 12Privately owned land may also
be designated in the applicable
Following completion of any work
pursuant to a building consent, a code
Allied to the Building Act is the Building
Code. This sets criteria to ensure
Māori land claims
district plan as being required by compliance certificate (or “CCC”) buildings are safe, sanitary, have
Land claims by Māori, the indigenous
the government or other competent should be obtained. When purchasing adequate means of escape and, in the
people of New Zealand, are governed
designating authority for a public work a building in New Zealand, a key item case of public buildings, have access
by the Treaty of Waitangi Act 1975.
(including compulsory acquisition that should be checked during the due and facilities for disabled persons.
Under the Act, grievances are heard
if necessary). The current market diligence investigation is whether there Existing buildings, which are being
by the Waitangi Tribunal which can
value of the land would be paid as are any outstanding code compliance altered, may require upgrading in the
then make recommendations to the
compensation. certificates for building work carried course of the alterations in order to
government regarding the resolution of
out at the property. This can be verified comply with these criteria as nearly
those grievances.
For more detail on the Resource by engaging a lawyer to review an up to as is reasonably practicable. Buildings
Management Act 1991, refer to date “LIM” report for the property. considered earthquake prone may also
Recommendations for the return of
the Environment and resource be required to be upgraded.
land to Māori are generally applicable
management law section. Most types of property (other than
only in respect to land owned by
stand-alone houses) are also required The Act imposes restrictions upon
the government or State-Owned
to hold a building warrant of fitness occupation of a building where public
Building works (or “BWOF”) that is issued annually areas of that building are subject
Enterprises. Privately owned land is not
subject to return to Māori ownership
confirming that certain building to building works for which a code
The Building Act 2004 is designed to unless the title to the land has been
systems and services (mostly related compliance certificate has not yet
regulate and control building work and specifically endorsed to that effect
to life safety, such as sprinklers, lifts been issued.
the use of buildings. Every new building (and, even then, current policy is not to
and fire alarms) comply with certain
and most substantial alterations or exercise that right). If it was exercised,
Building Act criteria. The existence
additions to existing buildings will the current market value would be paid.
of a BWOF should be checked during
require a building consent. Multiple-use the due diligence investigation by
approvals are available for group home For more information on Māori
reviewing an up to date “LIM” report for
builders who build homes throughout rights under the Treaty, refer to our
the property.
New Zealand using the same or New Zealand Māori and the Treaty of
similar plans. Waitangi section.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 13Environment Key points The Resource Applications for resource consent are
generally made to the relevant local
• The Resource Management Act 1991
Management Act authority. Depending on the type
and resource (RMA) is the primary instrument of
environmental regulation in New
The RMA regulates all uses of land,
of activity, the application may be
heard without public notification, on a
water and air, out to the edge of the 12 publicly notified basis, or with limited
management Zealand. It is however currently
subject to extensive reform and
is expected to be replaced in the
nautical mile coastal limit. It is largely
administered by local government
notification to affected parties only.
law in
through resource consents granted, or Applicants must provide a
near future.
withheld, under statutory and publicly comprehensive assessment of the
notified district and regional plans, and environmental impact of the proposal
• The Exclusive Economic Zone and
New Zealand Continental Shelf (Environmental
Effects) Act extends a variant of the
some national level documents. or use. Rights of appeal can generally
be exercised by the applicant, or by
District plans control the use of land. anyone who has made a submission
RMA into the sea and seabed 12 to
Regional plans control the use of water, on the application to the Environment
200 nautical miles offshore from
coastal matters and the discharge Court. (Special processes apply in
New Zealand.
of contaminants. some cases, such as for nationally
significant projects).
• New Zealand’s climate change
These plans classify activities as:
response is delivered through an
The RMA has a range of penalty and
Emissions Trading Scheme.
• permitted (not requiring enforcement provisions. Directors
resource consent) and senior managers can be found
personally liable for any acts or
• controlled, discretionary or non-
omissions by the company.
complying (a resource consent
is required and, where granted,
Central government can also provide
will often be subject to specific
national direction through National
conditions designed to mitigate any
Policy Statements, National Planning
adverse environmental effects), or
Standards and National Environmental
• prohibited (will not be consented). Standards.
Catherine Somerville-Frost – Partner
T: +64 9 358 9813
M: +64 27 486 3309
E: catherine.somerville-frost@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 14Under the RMA, polluters who
contaminate land can be liable. But
The Exclusive The Emissions The ETS currently covers forestry,
electricity production, industrial
owners or occupiers of contaminated Economic Zone and Trading Scheme processes, liquid fossil fuels, synthetic
land can also face enforcement action gases and waste. Although it was
for that contamination (even if it is
Continental Shelf The Emissions Trading Scheme designed as an “all gases, all sectors”
historic contamination caused by a (ETS) is the key delivery mechanism scheme, agriculture will not come fully
The Exclusive Economic Zone and
previous polluter). for New Zealand’s commitments to into the scheme until 2025.
Continental Shelf (Environmental
emission reduction, legislated for
Effects) Act (EEZ Act) extends a variant
When the RMA was enacted in through the Climate Change Response A recent series of amendments will:
of the RMA to the EEZ and applies to
1991, it placed a very high value on (Zero Carbon) Amendment Act 2020.
activities such as seismic surveying
local decision-making and public • phase out free allocations to high-
and cable laying, seabed mining and
consultation. It still reflects those The Zero Carbon Act: emitting trade-exposed industries,
the construction and installation of
founding values but has been much beginning in 2021 and gathering
oil and gas rigs. It also anticipates
amended over its history and most of • establishes a net zero emissions speed from 2030
possible future uses, including deep
those amendments have been designed target (allowing for forestry offsets)
sea aquaculture, carbon capture and • create a cost containment reserve
to streamline RMA processes and by 2050 for all greenhouse gases,
storage, and marine energy generation. which establishes a price floor of
to permit more central government except biogenic methane which is to
NZ$20 per unit and an effective
intervention with a view to speeding be brought within a range of 24% to
The permitting authority is the price ceiling of NZ$50 (each to be
up development. 47% below 2017 levels by 2050, and
Environmental Protection Authority (EPA), increased by 2% a year to provide
which must issue a decision on publicly • creates an independent Climate for inflation), and
A comprehensive review of the RMA
notified applications within six months of Change Commission which will
is currently underway, with changes • improve the auctioning system
receiving the application, or within 60 days be responsible for preparing five
expected to be legislated for within the for units.
of receiving a non-notified application. year emissions budgets (the first of
current Parliamentary term.
which will be delivered on 31 May
For more information, go to:
The EEZ Act identifies various factors 2021) and advising the Minister on
climatechange.govt.nz/emissions-
which should drive the EPA’s decision- the quantity of emissions which
trading-scheme
making. Several of these reflect will be permitted within each
environmental or biodiversity values but budget period.
they also include the economic benefit
to New Zealand and the efficient use
and development of New Zealand’s
mineral resource.
Appeal rights are to the High Court
and are limited to points of law. The
maximum penalty for breach of a marine
consent is NZ$10 million.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 15Minerals regime The Government is allowing existing
permits for oil and gas exploration to
Evaluation criteria for oil and gas
exploration under the allocation
All transfers of, or other dealings with,
a permit interest require the consent of
run their course but will not issue any system must meet health, safety New Zealand Petroleum & Minerals.
Access and rights to prospect, explore
new offshore permits and will issue new and environmental requirements
and mine New Zealand’s extensive
onshore permits only in the Taranaki and the applicants must engage with For more information, go to:
petroleum and mineral estate are
region. The National Party has promised indigenous communities. Permits can nzpam.govt.nz
governed by the Crown Minerals Act
that it will reverse this ban when next be granted for up to 15 years and give
1991 and by the Minerals Programme
in office. the holder exclusive rights to explore
and the Minerals Programme for
in the designated area. An exploration
Petroleum issued under it.
All petroleum, gold, silver and permit does not automatically confer
uranium deposits (including under mining rights. These must be applied
Acquisition of permits is through an
the sea) are the property of the for separately.
annual Block Offer process, although
Crown (Government). No person
this is currently tightly restricted.
may prospect, explore for, or mine, Return to the government is through
government-owned minerals without an a royalty regime, although there is
appropriate permit. provision in the Act for the government
also to participate in any given permit
The annual Block Offer process is and thus derive a fair financial return
limited to onshore Taranaki. through that avenue. The current policy
is not to exercise this right.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 16New Zealand Key points • These settlements have helped to
finance the creation of iwi corporations
and the “Māori economy”, which is
To address the ambiguities between
the two versions, the courts of New
Zealand do not seek to enforce the
• Māori are the indigenous people of
Māori and New Zealand.
•
valued at NZ$50 billion.
Iwi corporations often look to
actual wording of the Treaty. Instead, in
a landmark case in 1987 (New Zealand
• New Zealand has no written Māori Council v Attorney-General),
the Treaty constitution, but the Treaty of
Waitangi 1840 (the Treaty) is a
maximise returns from settlement
assets through joint venture (JV)
arrangements with overseas investors.
the Court of Appeal established the
principles of the Treaty of Waitangi:
of Waitangi
part of the foundational law of the Treaty imposes a duty on both the
the country, as recognised in a Crown and Māori to act in the spirit of
number of New Zealand statutes, The Treaty of Waitangi partnership envisaged by the original
court decisions and common signatories, and both Treaty partners
law principles. The Treaty of Waitangi was signed on must act reasonably, honestly and in the
6 February 1840 by representatives of utmost good faith.
• The Treaty is, in essence, an
agreement between the British the British Crown and some, but not all,
Māori iwi. Waitangi Day, observed on 6 Settlement of historical claims for
Crown and Māori chiefs, and
February each year, is a public holiday breaches of the Treaty must be
establishes a partnership based on
to honour the signing of the Treaty. negotiated with the government of
mutual duties to act reasonably,
the day. Some iwi and hapū groups
honestly and in the utmost
The Treaty has always been the subject choose to go straight into negotiation
good faith.
of debate as there are two versions – with the Crown. Others choose to
• The British Crown did not honour an English version and a Māori version first go through a Waitangi Tribunal
the Treaty, with the result that – and there are some significant hearing process.
Māori collectives (called iwi or differences between them. In particular,
hapū) have legitimate grievances. there are interpretation issues around The Waitangi Tribunal conducts
A political process was developed precisely what is meant by three comprehensive inquiries into Māori
in the 1990s to negotiate and settle key Māori concepts – kāwanatanga claims and can make non-binding
these grievances. The settlement (governorship), rangatiratanga recommendations to the government.
packages include cultural and (chieftainship) and taonga (treasures). The Waitangi Tribunal can make binding
commercial redress. The Treaty also guaranteed to Māori recommendations in very limited
“exclusive and undisturbed possession circumstances, relating to Crown owned
of their lands, forests, fisheries and forest land and certain lands previously
other properties”. owned by State-Owned Enterprises.
Te Aopare Dewes – Partner
T: +64 9 358 9839
M: +64 27 209 0810
E: teaopare.dewes@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 17Reports produced by the Tribunal
are then used by claimants as a basis
Māori land claims Treaty settlement process The Māori economy
for their direct negotiations with
Land claims by Māori are governed Iwi receive settlement of their historic The Māori economy is broadly defined
the Crown for settlement of their
by the Treaty of Waitangi Act 1975 grievances with the Crown in the as those privately or collectively owned
historical Treaty breach claims. The
and are heard by the Waitangi form of cultural and commercial businesses that have links to Māori
Tribunal also has jurisdiction to inquire
Tribunal which can then make non- redress. Commercial redress is usually ancestors. Its financial value has been
into ‘contemporary’ breaches of
binding recommendations to the determined by the negotiation of a assessed at NZ$68.7 billion comprising:
the Treaty.
government regarding the resolution quantum amount, followed by iwi or NZ$47.7 billion Māori-owned businesses
of those grievances. hapū purchasing Crown lands with and NZ$21 billion in Māori trusts,
The Treaty is not enforceable as that money. incorporations and other entities.
an international treaty or a matter
Generally, the Tribunal cannot
of statute law, but its principles
recommend the return of privately It may also include valuable rights Māori control 50% of New Zealand’s
became much more relevant in the
owned land to Māori, and cannot of first refusal for between 50 to fishing quota, and own around 40% of
contemporary context in the 1980s,
recommend the Crown to acquire 170 years (in some cases, longer) forestry. Some of these holdings were
in part because the government
privately-owned land. However, there over surplus Crown lands within the established through the ‘Sealords
legislated in 1985 to enable the
are some exceptions to this. traditional area of the iwi or hapū. Deal’ in 1992 (the Treaty of Waitangi
Tribunal to investigate breaches dating
settlement relating to Māori fishing
back to 1840 and after the insertion
Privately owned land which has a Some iwi and hapū have used rights) and the ‘Treelords Deal’ in 2007
into the State Owned Enterprises
“section 27B” memorial noted on the settlement monies to create large, (the Treaty of Waitangi settlement
Act 1986 of a provision preventing
title is land that was previously owned asset rich Māori corporates, the under which the Kaingaroa Forest was
the Crown from acting in a manner
by a State-Owned Enterprise. This three largest of which are now valued transferred from the Crown to central
inconsistent with the Treaty.
memorial notes that the Tribunal can at over NZ$1 billion each. These North Island iwi). Māori also own 30%
make a binding recommendation to the are now significant players in the of lamb, sheep and beef production
Many pieces of legislation also create and 10% of dairy and kiwifruit
Crown that it purchase the land and New Zealand economy.
a statutory requirement to consult production.
return it to Māori ownership as a way
Māori, including the Local Government
of settling a claim, a process known
Act 2002 and the Resource
as resumption. Iwi and hapū corporations have
Management Act 1991.
sought to maximise the returns
If the Waitangi Tribunal did make such from their asset base through joint
a recommendation, the owner would ventures and other partnerships
be compensated by the government with investors who can bring capital,
of the day. To date, the Waitangi value-added processing, employment
Tribunal has only ever made one binding opportunities, and market access.
recommendation for resumption of land China has been a particular focus for
and in that case, the Māori claimants these activities.
and the Crown negotiated a settlement.
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 18Taxation Key points Individuals are regarded as resident Income tax is imposed at 28% on
for income tax purposes if they have companies and unit trusts (which are
a permanent place of abode in New treated as companies under New
• New Zealand has a broad-based
within income and consumption tax
system. This includes withholding
Zealand or are present in New Zealand
for more than 183 days within any
Zealand tax law). Individuals (both
resident and non-resident) are taxed
12-month period. New migrants and, in progressively at between 10.5% and
New Zealand taxes on many cross border
payments and a robust general anti-
avoidance rule.
certain cases, returning New Zealanders
who have not been resident for tax
39%, with the 39% rate cutting in at
taxable income over NZ$180,000. As
purposes in New Zealand for at least noted above, non-residents are taxed
• The primary revenue sources ten years, can qualify for temporary only on their New Zealand-sourced
are: income/company tax, a transitional residence status. A income.
consumption tax on goods transitional resident is exempt from
and services (GST) and local New Zealand income tax on their For individuals, assessable income
authority rates. foreign-sourced income other than includes (among other items) salary
income from employment or the and wages, bonuses, other employment
• Capital gains tax, stamp duty, gift
supply of services for a period of four benefits or remuneration, partnership
duty and death duties are not
years after they meet the test for New income and investment income.
payable in New Zealand.
Zealand tax residency. For salary and wage earners, tax is
deducted at source by the employer
Income tax A company is regarded as resident in through the Pay As You Earn (PAYE)
New Zealand if it: system. The amount of tax deducted
For individuals and companies defined will depend on the gross salary or
as “resident” in New Zealand, income • is incorporated in New Zealand wage paid to the employee. Non-cash
tax is generally imposed on worldwide benefits provided to employees are
• has its head office in New Zealand
income. Non-resident individuals subject to Fringe Benefit Tax (FBT)
and companies are taxed only on • has its “centre of management” in which is payable by the employer.
New Zealand-sourced income, and New Zealand, or
their tax liability may be reduced by
• is controlled by its directors in
the provisions of an applicable Double
New Zealand.
Tax Agreement.
Bevan Miles – Partner
T: +64 9 357 8986
M: +64 21 240 7387
E: bevan.miles@chapmantripp.com
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 19For companies, net taxable income Exemptions will apply if the property is: Residents must provide an IRD number Permitted major changes are, more or
generally corresponds with accounting as part of the usual Land Information less, changes:
profit or loss. However, adjustments are • the seller’s main home New Zealand transfer process.
commonly required in relation to: Non-residents must also provide a • made to increase the efficiency of a
• inherited from a deceased estate
New Zealand IRD number as well as a business activity
• the timing of income and • sold as part of a relationship home jurisdiction tax number together
expenditure recognition break down. with another form of identification – • made to keep up to date with
such as a passport. In order to obtain advances in technology
• bad debts
The Government has announced that an IRD number, a non-resident will
• capital receipts and depreciation “new build” residential properties need a fully functional New Zealand • caused by an increase in the scale
rates, and acquired on or after 27 March 2021 bank account or confirmation from of a business activity, and
will be subject to a shorter five year a New Zealand reporting entity that
• various provisions and reserves. • caused by a change in the type of
“bright-line” period, however legislation customer due diligence has been
completed in accordance with products or services produced or
to achieve this has not yet been
New Zealand does not currently have a New Zealand anti-money laundering provided.
introduced (although it is expected to
broad based capital gains tax. In certain (AML) legislation.
apply retrospectively once enacted). Specific anti avoidance rules (described
circumstances, however, capital gains
are taxed. In particular, the proceeds as “anti-injection” rules) target schemes
Gain from sale of a property held for Treatment of tax losses involving the acquisition of a business
from the sale of real or personal
longer than five years or 10 years may If a resident company or a New Zealand with losses (relying on the business
property (including shares) may be
still be taxed if the Inland Revenue branch of a non-resident company continuity test to carry forward those
subject to income tax (for example,
Department (IRD) considers that the incurs a tax loss, that loss can generally losses) and diverting income or expenses
where the dominant purpose of the
seller acquired the property for a purpose be carried forward indefinitely to offset between that company and its associates.
initial purchase was to resell the asset
or intention of resale, or if one or more future New Zealand net income and Another specific anti-avoidance rule
at a profit). shared between group companies,
of the specific land taxation provisions prevents a business from changing its
applies (for example, if the seller carried provided a certain level of shareholder activities before a change in ownership
Special provisions apply to residential continuity (or in the case of group
on, or was associated with someone who for the purpose of meeting the business
properties other than the person’s companies, common ownership) is
carried on, a business of land dealing, continuity test.
main home. maintained, or the business continuity
land development or building at the time
test is met.
of acquiring the property and sells that Individuals and trusts can also carry
Gains from the sale of residential
property within 10 years). forward tax losses, but these losses
properties purchased: The business continuity test came into
force on 1 April 2020 with retrospective cannot be shared with other entities.
Residential Land Withholding Tax effect. It allows a company to carry There are also rules that apply to “ring-
• on or after 27 March 2021 and held (RLWT) applies where the seller is an forward losses arising from the 2013-14 fence” losses from residential property,
for less than 10 years, or offshore person and the residential land and subsequent income years following which will only be available to offset
is sold within the relevant “bright-line” an ownership continuity breach, future income from residential property
• between 29 March 2018 and 26 period. RLWT also applies to sales by provided there has been no major (including a taxable gain on sale). The
March 2021 and held for less than New Zealand entities that are ultimately change or cessation in the nature of the rule is designed to prevent property
five years more than 25% owned or controlled by business activities carried on by the investors from using excess deductions
offshore persons. (For more detail, refer company during the relevant period,
are taxed at the owner’s standard to reduce tax on other income.
unless the change is a permitted major
income tax rate under the“bright-line to the section on New Zealand’s cross-
change.
test”. border tax regime.)
Doing business in New Zealand
A GUIDE FOR INVESTORS
July 2021 HOME 20You can also read
