Doing business in New Zealand - chapman tripp guide for investors march 2018
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Doing business in New Zealand c h a p m a n t r i p p g u i d e fo r i n v e sto r s March 2018
Contents
About Chapman Tripp............................................................ 1 Consumer protections in New Zealand........................ 25
New Zealand at a glance......................................................2 Employment and health and safety law
in New Zealand.................................................................... 28
Overseas investment in New Zealand ............................4
Anti-trust, competition law in New Zealand................ 31
Establishing a business in New Zealand.........................6
Intellectual property in New Zealand........................... 33
Buying and developing real estate in New Zealand ....8
Financial services in New Zealand................................. 36
Environment and resource management law
in New Zealand..................................................................... 13 Investing in New Zealand’s capital markets ............... 40
New Zealand Māori and the Treaty of Waitangi.......... 16 Fundraising in New Zealand ............................................ 42
Taxation within New Zealand........................................... 18 Insolvency in New Zealand............................................... 44
New Zealand’s cross-border tax regime........................ 21 Resolving disputes in New Zealand............................... 46
Contract law in New Zealand........................................... 24 Emigrating to New Zealand ............................................ 48
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 We also help you to make sense
of an unfamiliar regulatory and
This guide is designed to provide
the prospective investor with an
cultural environment. We represent introduction to New Zealand’s legal
your business interests to relevant framework. The information is
regulatory bodies, including the accurate at the time of publication but
Overseas Investment Office (OIO), is necessarily high level and generic so
Chapman Tripp is New Zealand’s leading law firm. guide you through the resource should not be relied upon as a basis for
Established in 1876, we have a reputation for excellence management consent process and decision-making.
recommend the best approach for
and a long track record of delivering innovative, commercial dealing with Māori law. We recommend you speak to us about
solutions which respond to the individual needs of our clients. your investment requirements before
Chapman Tripp works with making any decisions so that we can
We understand what it takes to Our advice is clear and commercial. international clients, and has been provide you with advice that is specific
capitalise successfully on your We help you mitigate risk and maximise involved in some of the most high to your needs.
investment opportunities and, because your investment throughout the profile OIO applications in recent
we have a national, full-service team, phases of your business venture – times. We play a key role in mergers You can read more about Chapman
we can advise on all aspects of doing from evaluating potential investment and acquisitions, banking, financing, Tripp at chapmantripp.com
business in New Zealand. opportunities and acting on insolvency, restructuring, procurement
acquisitions through to advising on the processes, large scale infrastructure
most efficient way to structure your projects and dispute resolution.
business, the day-to-day operational
issues you need to be aware of and, We have more than 50 partners and
should it eventuate, how to achieve over 400 staff. We have offices in
a successful exit strategy. Auckland (the economic centre of New
Zealand, and home to more than a third
of the population), Wellington (the seat
Most Innovative National of government) and Christchurch (the
Law Firm of the Year South Island’s commercial hub).
(New Zealand)
IFLR Asia Awards 2018
New Zealand Law
“ Our advice is clear and commercial. We help
you mitigate risk and maximise your investment
Firm of the Year throughout the phases of your business venture.”
Chambers Asia Pacific Awards 2018
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 1
New Zealand Geography Culture Political and legal system
at a glance New Zealand is situated in the South
Pacific Ocean, with a land area
New Zealand culture values fairness,
ingenuity, practicality, modesty,
New Zealand is consistently rated
in the top four by Transparency
equivalent to Japan or Britain. We have restraint and informality. English is the International for freedom from
one of the largest exclusive economic everyday language but Māori and NZ corruption. We have a common legal
zones in the world at 4.1 million sign language are also recognised as system based on the British model with
square kilometres. official languages. an independent judiciary.
New Zealand consists of two main We aspire to be a multicultural society New Zealand has a stable
islands – the North Island and the but accord a special significance to parliamentary democracy with
South Island. It has a temperate climate Māori culture, reflecting Māori’s status a proportional voting system
and offers a high quality of life with as the indigenous people of this land. which tends to produce coalition
clean air and easy access to nature. governments. The two major parties,
which would generally lead a coalition
government, are National at the
Population conservative end of the spectrum and
Labour at the liberal end. The British
The resident population is just over sovereign is the titular Head of State
4.7 million people, one third of whom and is represented in New Zealand by a
live in Auckland. Governor-General.
New Zealand is a nation of migrants,
with one of the most ethnically diverse
populations in the world and a large
“ex-pat” community which provides
important international linkages.
“ New Zealand is consistently rated in the
top four by Transparency International for
freedom from corruption.”
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 2
Economy Free trade agreements
New Zealand is a safe place to invest New Zealand supports trade
and do business. It is currently ranked liberalisation and is party to a large
first of 189 countries by the World number of free trade agreements,
Bank for ease of doing business and for including with Australia, China,
starting a new business and second for Hong Kong, Chinese Taipei, South
protecting minority investors. Korea, ASEAN, Singapore, Thailand,
Malaysia, Brunei and Chile. We are
Major exports include dairy products, also prospective signatories to the
tourism, meat, timber and minerals. Comprehensive and Progressive
We also have developing industries Trans‑Pacific Partnership (CPTPP).
in export education, boat building,
IT, horticulture, wine and film. Information on New Zealand’s
international trading agreements can
Our stock exchange is the first in the be found on the Ministry of Foreign
world to open trading each day – two Affairs and Trade website:
hours ahead of Sydney, three hours mfat.govt.nz
ahead of Tokyo, four hours ahead of
Beijing, 12 hours ahead of London and
17 hours ahead of New York. Want to know more?
The currency is based on the New Go to: newzealand.com
Zealand dollar, which is freely floated or newzealandnow.govt.nz/investing-in-nz
against all major currencies. or nzte.govt.nz/en/invest
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 3
Overseas Key points When is consent required? • New Zealand citizens and persons
“ordinarily resident in New Zealand”
investment in • New Zealand welcomes foreign
investment and recognises
Overseas Investment Office (OIO)
consent may be required if the
(which, in this context, means
holding a permanent resident visa,
having resided in New Zealand for
New Zealand the positive economic and
social contribution it brings to
target business possesses any of
the following:
at least a year and having been
present in New Zealand for at least
New Zealanders.
183 days in the past year), and
• significant business assets –
• New Zealand consistently ranks
where the cost of a business • investors who can demonstrate
highly as an attractive investment
acquisition, or the value of the that they will be developing the
destination, with various studies
applicable New Zealand assets, land and adding to New Zealand’s
identifying the ease of doing
exceeds NZ$100 million (a higher housing supply or converting it to
business, low level of corruption,
limit applies for Australian non- a non-residential use which would
high quality of regulations,
government investors) have wider benefits to the country.
adherence to the rule of law,
significant investor protection • an interest in sensitive land, or
These changes are expected to come
and protection of personal
• fishing quota. into effect from mid-2018. They will
freedoms accorded to investors in
not apply to transactions entered
New Zealand.
into before the new law comes into
• Not all overseas investments into Alert force, even if the transaction is
New Zealand require consent. still conditional.
However, like most other countries, The definition of sensitive land is very
New Zealand does require overseas detailed and requires careful checking
persons to obtain consent for and analysis from qualified advisers.
Consent criteria
certain types of investments. In particular, land may be “sensitive”
if it adjoins certain types of land, or is All applicants for consent (including
“associated” with other land already persons with control of the applicant
controlled by an overseas person. if the applicant is an entity) are
required to meet the investor criteria
of business experience and acumen,
financial commitment and good
Residential land character. They must not be ineligible
individuals under the Immigration Act.
Bill Sandston – Partner The Overseas Investment Amendment
T: +64 9 357 9063 Bill, currently before Parliament, will Certain investments have additional
M: +64 27 271 1015
E: bill.sandston@chapmantripp.com
bring residential property (including criteria that must be met for consent to
lifestyle blocks and unit titles) into the be granted (see the following table). We
definition of sensitive land. The sale of recommend you check with a qualified
Doing business in New Zealand
chapman tripp guide for investors such properties would be restricted to: adviser on these requirements.
March 2018 home 4
Additional conditions or criteria for consent approval Off-shore transactions Alert
Transactions occurring outside New
Sensitive land To obtain consent, the overseas investor will need to Complex applications can take longer
demonstrate that the purchase will bring benefits additional Zealand may still require OIO consent
than the OIO targets. We can advise you of
to those which would accrue from continued New Zealand if the target business has interests in
likely application processing times when
ownership. These benefits are assessed against a variety of land or other assets in New Zealand.
preparing specific applications.
economic, social and conservation factors. The government OIO implications for off-shore
is currently proposing to include all residential land in the transactions should be assessed early
sensitive land category. in the transaction process to ensure
Consent conditions
that OIO timeframes do not cause
Rural land For non-urban land larger than 5 hectares, the overseas
unnecessary delays. Consent is usually granted subject
investor will need to show that the benefits to New
Zealand arising from the investment are “substantial and
to various conditions with which the
identifiable”, with particular focus on economic benefits. Consent application process applicant must comply. Often the
conditions will reflect the nature of
The consent application process
Special land Special land includes the foreshore, seabed, riverbed or the benefits claimed to support the
is administered by the OIO
lakebed that forms part of sensitive land. transaction in the consent application.
and governed by the Overseas
Special land transfers are subject to stricter conditions and
Investment Act 2005 (the Act) and
the special land must first be offered to the New Zealand Class exemptions
government before any sale to an overseas person.
accompanying regulations.
The requirements for consent do not
Farm land Farm land must be offered on the open market before a sale The overall consent decision rests with apply to certain situations covered by
to an overseas person can be completed. the relevant Ministers. The OIO assesses class exemptions including:
Exemptions from this requirement can be obtained, but the consent applications and makes
only in special circumstances and at the discretion of the recommendations to the Ministers. For • transfers within 95% wholly
relevant Minister. certain applications, the OIO itself makes owned groups
consent decisions under delegated
Forest land Under an announced change in policy, overseas investors • acquisition of redeemable
authority from the Ministers.
wanting to buy forest land, currently land over 5 hectares preference shares
devoted principally to forestry, are likely to need to
demonstrate that the acquisition will lead to increased
We recommend that potential • security arrangements in the
value-added processing within New Zealand. In addition the investors engage New Zealand legal ordinary course of business that
government is currently proposing to extend the coverage counsel early in the investment secure payment or performance of
of the OIA to include forestry rights over 1000 hectares process to assess whether consent is an obligation, and
per annum. needed and to ensure that there are
• underwriting of an issue of
no unnecessary delays.
Strategically important Transactions involving strategically important securities in the ordinary course of
infrastructure infrastructure on sensitive land face higher levels of business, provided that the position
Target processing times can be found
scrutiny, with continued New Zealand control being a is held for less than six months and
at linz.govt.nz.
relevant factor. voting rights are not exercised.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 5
Establishing Key points Establishing a New Zealand Alert
subsidiary company
a business in • Overseas persons can own
assets and operate businesses
We can assist and put you in touch with
providers of professional director and
A New Zealand company is a separate
New Zealand
registered office services in New Zealand.
in New Zealand.
legal entity responsible for its own
• It is relatively easy and free of assets and liabilities. There is no
restrictions to set up a company restriction on the size of a company’s
in New Zealand. share capital. There are no residency
Establishing a limited
• Overseas entities will need to
restrictions on shareholders. partnership
obtain a New Zealand tax number
Key points to note
and, depending on the volume The rules governing limited
of business, may be required • Every New Zealand company partnerships in New Zealand are
to register for the Goods and requires at least one New Zealand similar to those applying in other
Services Tax. resident director or one Australian jurisdictions, including Delaware,
resident director who is also a Australia and the Channel Islands.
• Overseas companies and limited
director of an Australian company. The distinctive feature of the limited
partnerships which intend to carry
As long as this requirement partnership model is that it is a
on business directly in New Zealand
is fulfilled, a New Zealand separate legal entity but provides
need to register with the New
company may have any number of the protections of limited liability to
Zealand Companies Office.
overseas directors. its members.
• There is no requirement
A limited partnership must have at
Alert for a company to have a
least one general partner and one
company secretary.
limited partner, who cannot be the
Unlike other countries, the Companies
• The Companies Office may require same person. A general partner may
Register maintained by the New Zealand
a certified proof of identity (e.g. be an overseas company registered
Companies Office is publicly available,
passport) and a certified proof of in New Zealand with at least one
including information regarding directors
residential address (e.g. utilities director who lives in New Zealand or
and shareholders such as their residential
bill) for overseas directors when who lives in Australia and is a director
address and full legal name.
registering a company. of an Australian company. A general
partner is jointly and severally liable
• Every New Zealand company
with the limited partnership and
requires a New Zealand registered
Tim Tubman – Partner any other general partners for the
T: +64 9 357 9076 office address/address for service.
unpaid debts and liabilities of the
M: +64 27 344 2178
E: tim.tubman@chapmantripp.com
limited partnership.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 6
A limited partner has the protection of Branch, subsidiary or limited partnership?
limited liability, but must not take any
part in the management of the limited
There are advantages to each of the three options, depending on the circumstances.
partnership. A limited partner can be
an overseas person.
Branch Subsidiary Limited partnership
Entering a joint venture/ Liability Because the branch is legally the A special purpose subsidiary may The general partner (which may be
general partnership overseas company, there is no
sheltering of liability.
help ring-fence liability. But in
practice, unless the subsidiary is
a company) manages the business
and can be liable for any debts
substantial in its own right, any and obligations which the limited
Joint ventures in New Zealand are significant commercial dealings partnership itself is unable to
arrangements entered into by two or may need to be guaranteed by the meet. The limited partners are
overseas parent. passive investors and their liability
more parties to invest in a particular
is limited to the amount of capital
project. They can be carried out by
they agree to contribute.
a company, a limited partnership
or an unincorporated contractual Tax The branch will generally be The subsidiary is a New Zealand tax Limited partners are treated as
joint venture. considered to be non-resident for resident and will be subject to New holding the assets of the limited
tax purposes, with the effect that Zealand tax on the subsidiary’s partnership and personally derive
A general partnership is not a separate the overseas company will have to worldwide income. Losses cannot the income and deductions. This
legal person and each partner is jointly pay any tax obligations incurred in be offset against any income of enables them to distribute capital
and severally liable for the debts of New Zealand but may also be able the overseas parent and cannot gains among themselves tax free
to include the branch activities in usually be claimed in the parent’s and to pass through tax losses
the partnership. Responsibilities and
the tax return filed in the home home jurisdiction. (although only to the extent of
liabilities can be allocated according to jurisdiction of the head office. that limited partner’s exposure
a partnership deed, but partners do not to the loss).
enjoy the protection of limited liability.
For this reason, some investors prefer
to pursue joint ventures through a
special purpose vehicle company or
limited partnership.
An investment in a joint venture may
be subject to the Overseas Investment
Act (see the Investing in New Zealand
section for more detail).
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 7
Buying and Key points Registered title system Forms of title
developing • All titles in New Zealand are
registered at Land Information
New Zealand uses the Torrens land
registration system under which most
In New Zealand there are three main
forms of title.
real estate in New Zealand. “Freehold” title is
the most common. Particular care
parcels of land have their own titles
showing dimensions and location, Freehold – this is the most common
New Zealand
needs to be taken when dealing with ownership and other interests (and best) form of title available in
“leasehold” or “unit title” properties. affecting the land. The government New Zealand.
guarantees the accuracy of titles,
• When purchasing property in
which can be searched by the public for Leasehold – the purchaser of a
New Zealand, it is usual to sign
a nominal fee. leasehold property acquires the
a sale and purchase agreement
benefit of a lease of the property
that is conditional upon the
Chapman Tripp provides a full title (as opposed to the freehold). Leasehold
purchaser carrying out a due
searching service. title is particularly prevalent within the
diligence investigation and being
Auckland waterfront area. The term
satisfied with the results of
The primary attraction of the Torrens and rental structure of these leases
that investigation.
system is that dealings can be can vary significantly. Particular care
• Overseas investors need conducted in reliance on a single title, needs to be taken when acquiring
government consent under the rather than on a succession of title leasehold property, especially when
Overseas Investment Act to buy deeds. New Zealand has converted the lease reserves an annual rent that
“sensitive” land (which includes almost all titles, plans and instruments is subject to review under the terms
farm land) or any other property into an electronic format, allowing of the lease.
where the consideration is real-time searching and electronic
over NZ$100 million. Additional registration of all land title and
restrictions relating to the purchase surveying transactions.
of residential property are also
likely to come into force in 2018. Under New Zealand law, buildings and
See the Investing in New Zealand other improvements permanently
section for more detail. attached to the land form part of the
land itself and pass with ownership of
the land, unless the seller and buyer
agree otherwise.
Mark Nicholson – Partner Dealings with land are registered
T: +64 9 357 9297 electronically against the title.
M: +64 27 305 9120
E: mark.nicholson@chapmantripp.com
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 8Unit Title – unit titles are similar to it is not uncommon to find leasehold particular focus on the management the purchaser with a pre‑contract other forms of title save that they are unit titles within the Auckland and maintenance of common property disclosure statement which contains limited to a defined part of a building waterfront area. A purchaser of a unit (such as lobbies and lifts) and the information on the unit title being or property. They are the most title property automatically becomes structural elements of the building purchased (including the amount common form of title for apartment a member of the “body corporate”. as well as common building services. of the “levies” payable to the body buildings (with each individual The body corporate effectively Before entering into an agreement corporate to cover the cost of the apartment comprising a single unit governs the building under the terms to purchase a unit title property, insurance of the building as well as its title). Most unit titles are freehold but of the Unit Titles Act 2010, with a the vendor is obliged to provide management and maintenance). Doing business in New Zealand chapman tripp guide for investors March 2018 home 9
Contracts for sale and • a residential property that is to be -- the existence of any outstanding Seismic rating of
developed by the vendor (commonly code compliance certificates
purchase of land referred to as buying property “off in respect of any building work
commercial buildings
the plans”). undertaken at the property (see
To be enforceable under New Zealand section below on building works) As a result of the Christchurch
law, a contract for the sale and Where a real estate agent is engaged earthquakes of 2010 and 2011,
-- the existence of a building warrant
purchase of land must be in writing by a seller to effect a sale, commission purchasers of commercial buildings will
of fitness which is required for
and signed by the parties involved or is payable by the seller. There is no now usually include the seismic rating
most buildings other than stand-
their authorised agents. Once signed, stamp duty. of those buildings as part of their due
alone houses (see section below on
an agreement for sale and purchase diligence investigation.
building works)
becomes legally binding on all parties.
Due diligence -- any relevant records held by the All new buildings in New Zealand
Sale and purchase agreements can be Council regarding the property are required to be constructed to
made subject to conditions which are Due diligence is a fundamental (for example the existence 100% of the current building code
designed to protect either the seller component of the process of acquiring of any contamination or (often referred to as “New Building
or the buyer. Common conditions are property in New Zealand. Depending geotechnical issues or whether Standards” or “NBS”). However,
the buyer raising finance and the buyer on the nature of the property being the building has been identified older buildings are unlikely to have
being satisfied with the results of the acquired, due diligence commonly as “earthquake prone”) been constructed to 100% of NBS,
due diligence investigation (see below). entails engaging a lawyer to review: either because of the lower building
-- the existence of any rates arrears.
standards applying at the time the
You should always obtain legal • the title to the property and (in the building was constructed or because
In addition, you will need:
advice before entering into a sale case of commercial property) the of poor design or workmanship.
and purchase agreement. However, terms of any leases
• a registered valuer to undertake a
particular care needs to be taken
• council records for the property valuation of the property, and
before entering into an agreement Alert
in the form of a “LIM” report
to purchase: • a building inspector/engineer
to identify the following types
to review the condition of the An older building with a seismic rating
of issues:
• a commercial property (which, building and identify any defects or of less than 34% of NBS is classified as
depending on size and value, may -- any enforcement action being maintenance issues (see also the “earthquake prone” and will be subject
be subject to fairly significant legal taken by the council for non- comments below about the “seismic to statutory requirements for seismic
negotiation), or compliance with statutory rating” of commercial buildings). strengthening works. Particular care needs
or regulatory requirements to be taken with heritage buildings and
buildings constructed before 1976 which
are more likely to be earthquake prone.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 10Typically, most investors in commercial Residential property – Gain from sale of a property held Additionally, residents and
property in New Zealand look for a for longer than two years (or five non‑residents will be required to
seismic rating of at least 67% of NBS.
tax considerations years if the proposed legislation is provide an IRD number as part of the
A rating of less than 67% can have an enacted) may still be taxed if the usual Land Information New Zealand
impact on the value of the property Gains from the sale of residential Inland Revenue Department (IRD) transfer process (unless they are a
and also the ability to attract or retain properties purchased after 1 October considers that the seller acquired the resident and the property is their
tenants. Most major corporates in New 2015 and held for less than two years property for a purpose or intention of main home). A non-resident will also
Zealand will refuse to lease property in will be taxed at the owner’s standard resale, or if one or more of the specific be required to have a New Zealand
New Zealand if it has a seismic rating of income tax rate. Exemptions will apply land taxation provisions applies (for bank account and to provide a home
less than 67%. if the property is: example, if the seller carried on, or was jurisdiction tax number together with
associated with someone who carried another form of identification – such as
There are two main types of report • the seller’s main home on, a business of land dealing, land a passport.
issued by engineers to assess the development or building at the time of
• inherited from a deceased estate
seismic rating of a building: acquiring the property and sells that
• sold as part of a relationship property within ten years).
Resource Management
• an “ISA” (Initial Seismic break down. Act and district plans
Assessment), a very high level The Residential Land Withholding
desktop study that is not always The government has introduced Tax (RLWT) applies where the
The Resource Management Act 1991
accurate and should be treated with legislation to increase the two year seller is an offshore person and the
(RMA) is New Zealand’s principal
caution, and period to five years, so that gains residential land is sold within two
statute relating to the use of land,
made on residential properties sold years of acquisition (or five years if the
• a “DSA” (Detailed Seismic water, minerals, the coast, air and
within five years of acquisition would proposed changes referred to above
Assessment) which is usually more physical resources. The RMA has major
be taxable. The new five year rule is are enacted). The RLWT also applies
accurate but will generally cost implications for industrial projects
intended to apply to all residential to sales by New Zealand entities that
more than an IEP. However, care and property developments. A new
property acquired from the date of are ultimately more than 25% owned
still needs to be taken to review the development may require a number
enactment, which is expected to occur or controlled by offshore persons. (For
report to identify any limitations of consents under the Act before it
in late March 2018. The current two more detail, refer to the section on New
on the scope of the investigations can go ahead.
year rule will continue to apply to a Zealand’s cross-border tax regime.)
undertaken by the engineer.
property provided a binding sale and
purchase agreement was entered
If the engineer’s report was obtained
into prior to enactment of the new
by the vendor, the purchaser should
legislation. Different acquisition date
consider requiring either that the
rules apply to non-standard purchases
engineer confirm in writing that the
of land for the purposes of applying
purchaser may rely on the report or
these tax provisions.
that the report be re-addressed to
the purchaser.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 11Controls on development are Building works Most types of property (other than Māori land claims
administered by locally elected stand-alone houses) are also required
government authorities and are to hold a building warrant of fitness
The Building Act 2004 is designed to Land claims by Māori, the indigenous
expressed through a range of publicly (BWOF) that is issued annually
regulate and control building work and people of New Zealand, are governed
notified plans. These include regional confirming that certain building
the use of buildings. Every new building by the Treaty of Waitangi Act 1975.
plans, regional coastal plans and systems and services (mostly related
and most substantial alterations or Under the Act, grievances are heard
district plans. Plans set out rules to life safety, such as sprinklers, lifts
additions to existing buildings will by the Waitangi Tribunal which can
for activities in various locations or and fire alarms) comply with certain
require a building consent. Multiple-use then make recommendations to the
“zones”. Parties seeking consent to Building Act criteria. The existence
approvals are available for group home government regarding the resolution of
proceed with a development must of a BWOF should be checked during
builders who build homes throughout those grievances.
follow the procedures set out in the the due diligence investigation by
New Zealand using the same or
relevant plan. This may involve public reviewing an up to date “LIM” report for
similar plans. Recommendations for the return of
participation through the public the property.
land to Māori are generally applicable
notification of the consent application.
Following completion of any work only in respect to land owned by
Allied to the Building Act is the Building
pursuant to a building consent, a code the government or State-Owned
Privately owned land may be Code. This sets criteria to ensure
compliance certificate (CCC) should be Enterprises. Privately owned land
designated in the district plan as being buildings are safe, sanitary, have
obtained. When purchasing a building is not subject to return to Māori
required by the government or other adequate means of escape and, in the
in New Zealand, a key item that should ownership unless the title to the land
competent designating authority for case of public buildings, have access
be checked during the due diligence has been specifically endorsed to that
a public work (including compulsory and facilities for disabled persons.
investigation is whether there are effect (and, even then, current policy
acquisition if necessary). The current Existing buildings, which are being
any outstanding code compliance is not to exercise that right). If it was
market value of the land would be paid altered, may require upgrading in the
certificates for building work carried exercised, the current market value
as compensation. course of the alterations in order to
out at the property. This can be verified would be paid.
comply with these criteria as nearly
by engaging a lawyer to review an up to
For more detail on the RMA, refer as is reasonably practicable. Buildings
date “LIM” report for the property. For more information on Māori rights
to the Environment and resource considered earthquake prone may also
under the Treaty, refer to our New
management law section. be required to be upgraded.
Zealand Māori and the Treaty of
Waitangi section.
The Act imposes restrictions upon
occupation of a building where public
areas of that building are subject
to building works for which a code
compliance certificate has not yet
been issued.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 12Environment Key points The Resource Applications for resource consent
are generally made to the relevant
Management Act
and resource • The Resource Management
Act is the primary instrument
local authority. Depending on the type
of activity, the application may be
The Resource Management Act (RMA) heard without public notification, on a
management of environmental regulation in
New Zealand.
regulates all uses of land, water and air,
out to the edge of the 12 nautical mile
publicly notified basis or with limited
notification to affected parties only.
law in New • The Exclusive Economic Zone and
Continental Shelf (Environmental
coastal limit. It is largely administered
by local government through resource Applicants must provide a
Zealand
Effects) Act extends a variant of consents granted, or withheld, under comprehensive assessment of
the RMA into the sea and seabed statutory and publicly notified district the environmental impact of the
12 to 200 nautical miles offshore and regional plans. proposal or use. Rights of appeal can
from New Zealand. be exercised by the applicant, or by
District plans control the use of land. anyone who has made a submission on
• New Zealand’s climate change
Regional plans control the use of water, the application, to the Environment
response is currently delivered
coastal matters and the discharge Court. (In some cases, such as for
through an Emissions Trading
of contaminants. nationally significant projects, special
Scheme. The government also
processes apply).
intends to pass a Zero Carbon
These plans classify activities as:
Act by the mid-2019, which will
The RMA has a range of penalty and
establish an independent Climate
• permitted (not requiring enforcement provisions. Directors
Change Commission.
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
will often be subject to specific
provide national direction through
conditions designed to mitigate any
National Policy Statements, National
adverse environmental effects), or
Planning Standards and National
• prohibited (will not be consented). Environmental 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
chapman tripp guide for investors
March 2018 home 13When the RMA was first passed in The Exclusive Economic Appeal rights are to the High Court Other sectors are forestry, electricity
1991, it placed a very high value on and are limited to points of law. The production, industrial processes, liquid
local decision-making and public
Zone and Continental Shelf maximum penalty for breach of a fossil fuels, synthetic gases and waste.
consultation. It still reflects those (Environmental Effects) Act marine consent is NZ$10 million. As part of a transition towards “full
founding values but it has been much implementation” of the ETS, other
amended over its history and most Permitted activities for oil and gas and than in respect of the forestry sector,
The Exclusive Economic Zone and
of those amendments have been seabed mining are marine scientific emitters were previously obliged to
Continental Shelf (Environmental
designed to streamline RMA processes research, exploration and prospecting surrender only one unit for every two
Effects) Act (EEZ Act) extends a
and to permit more central government (provided those activities meet tonnes of emissions of carbon dioxide
variant of the RMA to the EEZ and
intervention with a view to speeding the permitted activity conditions). equivalent. Participants can buy
applies to activities such as seismic
development. It is expected that Other mining-related activities will units on the open market or from the
surveying and cable laying, seabed
the recent change in government require consent. government. Units purchased directly
mining and the construction and
to one that is Labour-led may result from the government are currently
installation of oil and gas rigs. It also
in the ‘winding back’ of many of subject to a price cap of NZD$25 per
these changes.
anticipates possible future uses, Climate change policy unit. The ETS’s one for two surrender
including deep sea aquaculture, carbon
mechanism is being phased out, ending
capture and storage, and marine
Under the RMA, polluters who The Emissions Trading Scheme (ETS), on 1 January 2019.
energy generation.
contaminate land can be liable, but established in 2008, is currently New
owners or occupiers of contaminated Zealand’s primary response to climate Emission intensive, trade exposed
The permitting authority is the
land can also face enforcement action change and the key mechanism for industries are also allocated a number
Environmental Protection Authority
for that contamination (even if it is delivery of New Zealand’s commitment of free emission units to off-set their
(EPA), which must issue a decision on
historic contamination caused by a to emission reduction. It is an “all gases, liability. This free allocation is being
publicly notified applications within six
previous polluter). all sectors” scheme, but agriculture reassessed as part of a further review
months of receiving the application,
is currently required only to report of the ETS, with consultation expected
or within 60 days of receiving a non-
its emissions and not to surrender from late-2018.
notified application.
emission units. Current indications
are that new government may remove The new government, which includes
The EEZ Act identifies various factors
this exemption (but provide a free the Green Party, has made climate
which should drive the EPA’s decision-
allocation to farmers of 95% of change a policy priority and plans
making. Several of these reflect
liabilities in the initial years), although within the current parliamentary term
environmental or biodiversity values
this is likely to be the subject of further to introduce a Zero Carbon Act, along
but they also include the economic
consideration by an independent the lines of the UK Climate Change
benefit to New Zealand and the
Climate Change Commission later this Act 2008. While the specific details
efficient use and development of New
year (see overleaf). of the Zero Carbon legislation are yet
Zealand’s mineral resource.
to be established, the government has
indicated that it will:
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 14• set long term (as yet undetermined) Minerals regime Labour has indicated that it will Return to the government is through
emissions reduction targets discontinue the annual competitive a royalty regime, although there is
block tender process and has said that provision in the Act for the government
• appoint an independent Climate Access to and rights to prospect,
the large Department of Conservation also to participate in any given permit
Change Commission explore and mine New Zealand’s
estate will be off-limits for mining, and thus derive a fair financial return
extensive petroleum and mineral
• include a climate impact analysis in especially open cast mining. through that avenue. The current policy
estate are governed by the Crown
all new legislation, and is, however, not to exercise this right.
Minerals Act 1991 and by the Minerals
Evaluation criteria for oil and gas
• develop a comprehensive set of Programme and the Minerals
exploration under the allocation All transfers of, or other dealings with,
environmental, social and economic Programme for Petroleum issued
system run by previous governments a permit interest require the consent
sustainability indicators. under it.
included capability to meet of New Zealand Petroleum & Minerals
health, safety and environmental to be effective.
The Zero Carbon Act is likely to be high All petroleum, gold, silver and uranium
requirements and to engage with
level, with a focus on New Zealand’s existing in land (including under the
indigenous communities. Permits could For more information, go to:
emissions profile as a whole. However, sea) is the property of the Crown
be granted for up to 15 years and gave nzpam.govt.nz
we expect the directions and targets (government). No person may prospect,
the holder exclusive rights to explore
in the Act to flow through to more explore for, or mine, government-
in the designated area. An exploration
definite policy measures (including owned minerals without an appropriate
permit did not automatically confer
potential changes to the ETS), intended permit. With the change to a Labour-led
mining rights. These must be applied
to drive private sector action. government, permits will be much
for separately.
harder to come by, if not impossible.
The government will consult on the
proposed Zero Carbon legislation from
May 2018. For more information, go to:
climatechange.govt.nz/emissions-
trading-scheme
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 15New Zealand Key points • These settlements have helped
to finance the creation of iwi
The Treaty has always been the subject
of debate as there are two versions –
Māori and • Māori are the indigenous people
of New Zealand, a status which
corporations, some of which are
now significant players in the
an English version and a Māori version
– and there are some differences
New Zealand economy. between them. In particular, there
the Treaty is recognised in a number of
New Zealand statutes, common • The iwi corporations often
are interpretation issues around
precisely what is meant by three
of Waitangi
law principles and the Treaty of look to maximise returns from
key Māori concepts – kāwanatanga
Waitangi 1840 (the Treaty). settlement assets through joint
(governorship), rangatiratanga
venture (JV) arrangements with
• New Zealand has no written (chieftainship) and taonga (treasures).
overseas investors.
constitution, but the Treaty is a Also, as colonisation advanced and
part of the foundational law of there was an increased appetite for
The Treaty of Waitangi, signed in
the country. It is, in essence, an land, the principles of the Treaty were
1840 by representatives of the
agreement between the British not honoured by settler governments.
British Crown and Māori, established
Crown and Māori chiefs and
a partnership imposing on both
establishes a partnership based Claims for breaches of the Treaty can
parties the duty to act reasonably,
on mutual duties to act reasonably, be negotiated with the government of
honestly and in the utmost good
honestly and in the utmost the day, or can be heard by the Waitangi
faith. The Treaty guaranteed to Māori
good faith. Tribunal. The Tribunal conducts
“exclusive and undisturbed possession
comprehensive inquiries into Māori
• The British Crown did not honour of their lands, forests, fisheries and
claims and can make non-binding
the Treaty, with the result that other properties”.
recommendations to the government.
Māori collectives (called iwi or
The exceptions are Crown forest land
hapū) have legitimate grievances. Waitangi Day, observed 6 February
and certain lands previously owned
A political process was developed each year, is a public holiday to honour
by State-Owned Enterprises, over
in the 1990s to negotiate and the signing of the Treaty.
which the Tribunal may make binding
settle historical grievances.
recommendations. The Tribunal
The settlement packages include
also has jurisdiction to inquire into
cultural and commercial redress.
‘contemporary’ breaches of the Treaty.
Te Aopare Dewes – Senior associate
T: +64 9 358 9839
M: +64 27 209 0810
E: teaopare.dewes@chapmantripp.com
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 16The Treaty is not enforceable as Treaty settlement process Māori control 50% of New Zealand’s
a matter of statute law, but its fishing quota, and own 40% of
principles became much more forestry. Some of these holdings were
Iwi receive settlement of their
relevant in the contemporary context established through the ‘Sealords
historic grievances with the Crown in
in the 1980s, in part because the Deal’ in 1992 (the Treaty of Waitangi
the form of cultural and commercial
government legislated in 1985 to settlement relating to Māori fishing
redress. Commercial redress is usually
enable the Tribunal to investigate rights) and the ‘Treelords Deal’ in 2007
determined by the negotiation of a
breaches dating back to 1840 and (the Treaty of Waitangi settlement
quantum amount, followed by iwi or
after the insertion into the State under which the Kaingaroa Forest
hapū purchasing Crown lands with
Owned Enterprises Act 1986 of a was transferred from the Crown to
that money.
provision preventing the Crown from central North Island iwi). Māori also
acting in a manner inconsistent with own 30% of lamb, sheep and beef
It may also include valuable rights of
the Treaty. production and 10% of dairy and
first refusal for between 50 to 170
kiwifruit production.
years (in some cases, longer) over
Many pieces of legislation also create
surplus Crown lands within the iwi’s or
a statutory requirement to consult Iwi and hapū corporations have
hapū’s traditional area. Some iwi and
Māori, including the Local Government sought to maximise the returns
hapū have used settlement monies
Act 2002 and the Resource from their asset base through joint
to create large, asset rich Māori
Management Act 1991. ventures and other partnerships with
corporates. These are now significant
investors who can bring capital, value-
players in the New Zealand economy.
added processing and employment
opportunities, and market access.
China has been a particular focus
for these activities.
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 17Taxation within Key points Income tax A company is regarded as resident in
New Zealand if it:
New Zealand • New Zealand has a broad-based
income and consumption tax
For individuals and companies defined
as “resident” in New Zealand, income
• is incorporated in New Zealand
system. This includes withholding tax is generally imposed on worldwide • has its head office in New Zealand
taxes on many cross-border income. Non-resident individuals and
• has its “centre of management” in
payments and a robust general anti- companies are taxed only on New
New Zealand, or
avoidance rule. Zealand-sourced income, and their
tax liability may be reduced by the • is controlled by its directors in
• The primary revenue sources
provisions of an applicable Double New Zealand.
are: income/company tax, a
Tax Agreement.
consumption tax on goods
Income tax is imposed at 28% on
and services (GST) and local
Individuals are regarded as resident companies and unit trusts (which are
authority rates.
for income tax purposes if they treated as companies under New
• Capital gains tax, stamp duty, have a permanent place of abode in Zealand tax law). Individuals (both
gift duty and death duties are not New Zealand or are present in New resident and non-resident) are taxed
payable in New Zealand currently. Zealand for more than 183 days within progressively at between 10.5% and
However, the government has any 12-month period. New migrants 33%. As noted above, non-residents
appointed a tax working group and, in certain cases, returning New are taxed only on their New Zealand-
to review the tax system and an Zealanders who have not been resident sourced income.
expected outcome of that review for tax purposes in New Zealand for
is the introduction of a capital at least ten years, can qualify for For individuals, assessable income
gains tax. temporary transitional residence includes (among other items) salary
status. A transitional resident is and wages, bonuses, other employment
exempt from New Zealand income tax benefits or remuneration, partnership
on their foreign-sourced income other income and investment income.
than income from employment or the For salary and wage earners, tax is
supply of services for a period of four deducted at source by the employer
years after they meet the test for New through the Pay As You Earn (PAYE)
Zealand tax residency. system. The amount of tax deducted
will depend on the gross salary or
wage paid to the employee. Non-cash
benefits provided to employees are
Graeme Olding – PARTNER subject to fringe benefit tax which is
T: +64 9 357 9259 payable by the employer.
M: +64 27 591 6103
E: graeme.olding@chapmantripp.com
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 18For companies, net taxable income Special provisions apply to residential The tax treatment of capital gains To avoid the double payment of
generally corresponds with accounting properties other than the person’s is likely to change. A tax working tax on the same income (i.e. by the
profit or loss. However, adjustments main home: group is reviewing certain aspects company and the shareholder when the
are commonly required in relation to: of New Zealand’s tax system and an company’s income is distributed as a
• income tax is payable on any gains expected outcome of that review is the dividend), imputation credits may be
• the timing of income and made from sale if sold within two introduction of a capital gains tax with attached to dividends paid by resident
expenditure recognition years of purchase (the government a potential application date in 2021. companies (to both residents and non-
has introduced legislation to extend residents). Imputation credits received
• bad debts
this rule to five years, which is likely Treatment of tax losses by resident shareholders (companies
• capital receipts and depreciation to come into effect from late‑March and individuals) are offset against any
If a resident company or a New Zealand
rates, and 2018), and tax payable on their income, including
branch of a non-resident company
tax on dividends received.
• various provisions and reserves. • an Inland Revenue Department incurs a tax loss, that loss can generally
(IRD) number is required for either be carried forward indefinitely to
A dividend paid by a resident company
New Zealand does not currently purchase or sale. This requirement offset future New Zealand net income
to a resident is generally subject to a
have a broad based capital gains tax. applies equally to residents and and shared between group companies,
33% withholding tax. If the dividend is
In certain circumstances, however, non-residents. Persons resident in provided a certain level of shareholder
fully imputed (i.e. imputation credits
capital gains are taxed. In particular, another jurisdiction will also have continuity (or in the case of group
are attached at the maximum rate)
the proceeds from the sale of real or to provide any tax identification companies, common ownership) is
only a residual 5% withholding tax will
personal property (including shares) number they have in that country. maintained. Individuals and trusts
be imposed (i.e. the 33% tax liability is
may be subject to income tax (for can also carry forward tax losses, but
reduced to 5% by the 28% tax paid by
example, where the dominant purpose The Residential Land Withholding Tax these losses cannot be shared with
the company).
of the initial purchase was to resell the (RLWT) applies where the seller is an other entities.
asset at a profit). offshore person and the residential
land is sold within two years of Taxation of dividends paid by
acquisition (or within five years of resident companies to residents
acquisition if the legislation referred
Dividends paid by resident companies
to above is enacted). The RLWT also
to resident shareholders are, in most
applies to sales by New Zealand
instances, taxable to the shareholder.
entities that are ultimately more than
However, dividends paid between
25% owned or controlled by offshore
New Zealand resident companies that
persons. (For more detail, refer to the
are part of the same wholly-owned
section on New Zealand’s cross-border
group are generally exempt (subject
tax regime.)
to certain other requirements).
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 19Portfolio Investments Entities (PIEs) PIEs are not taxed like companies. Goods and Services Local government rates
Instead their income is taxed only
Investment entities which are tax
once – either to the PIE if the investor
Tax (GST)
resident in New Zealand can take Rates are the main source of local
is an individual or trustee (other than
advantage of New Zealand’s PIE tax government revenue. These are
a trustee of a unit trust or charitable GST is a value-added tax charged at
regime. Broadly speaking, to qualify calculated as a percentage of the value
trust) or to the investor (if the 15% on the supply of most goods and
as a PIE, they must be widely held (or of land and/or capital improvements.
investor is a company or another PIE). services in New Zealand.
owned by widely held vehicles) with
For individuals, the PIE pays tax at
no investor holding more than 20%
more or less the investor’s marginal Suppliers are required to register for
of any investor class, and the PIE
tax rate, with a cap of 28%. GST if they carry on a taxable activity
not holding more than 20% of any
through which they will make taxable
company or unit trust it invests into
Non-resident investors in certain PIEs supplies of more than NZ$60,000
(subject to some exceptions).
bear no New Zealand tax on foreign- per year. A person carrying on a
sourced income. taxable activity can voluntarily
A PIE is exempt from tax on gains
register for GST even if under this
from the sale of shares in New Zealand
NZ$60,000 threshold.
resident companies, and in Australian
companies that are listed on certain
Certain supplies of goods and services
approved indices of the Australian
can be either exempt from GST (e.g.
stock exchange.
financial services) or zero-rated
(e.g. certain “exported” services and
supplies wholly or partly consisting
of land).
Doing business in New Zealand
chapman tripp guide for investors
March 2018 home 20You can also read
