Overseas Investment Regulation in NZ - Simpson Grierson
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Overseas Investment
Regulation in NZ
Foreign investment in New Zealand is generally
encouraged. However, there are certain rules
in place to protect sensitive New Zealand
assets. This guide summarises which overseas
investments require New Zealand Government
consent, and how consent can be obtained.
September 2021
Simpson GriersonThe Overseas Investment Act 2005 (Act) regulates investments ther land that is “sensitive” because it includes
o
by "overseas persons" in "sensitive land" and/or "significant or is near to marine and coastal areas, other
business assets". It does this through a body called the waterways, national or regional parks, conservation
Overseas Investment Office (OIO). If consent is required under areas, areas of historic significance or land of
the Act, then an application must be made to the OIO and significance to Māori; or
consent must be granted before the investment can proceed.
There are four main investment pathways: significant business
land on certain specified islands.
assets, sensitive land, residential land, and forestry. In certain
limited circumstances, the relevant government ministers can
“call-in” and prohibit a transaction even where the investment
Generally, an “overseas persons” who is not “ordinarily
is not an investment in “sensitive land” or “significant
resident” in New Zealand but holds a residence class visa
business assets”.
will require consent before they can acquire residential land.
There are some exemptions, including the following:
When is OIO consent required?
• Investors or developers who are “overseas persons” may be
What is an “overseas person”? able to obtain consent to purchase residential land where
The definition of "overseas person" is central to the consent they will increase the housing supply (ie by building houses)
regime. An “overseas person” includes: and commit to sell the properties once the investment
is complete.
• natural persons who are not New Zealand citizens or
“ordinarily resident in New Zealand”; • Australian and Singapore investors who are not
“ordinarily resident in New Zealand” will not need consent
• a body corporate incorporated outside New Zealand;
to acquire residential land that is not otherwise “sensitive”.
• a body corporate (including a New Zealand company)
An investment in a business which owns or leases “sensitive
which is a "25% or more subsidiary" of a body corporate
land” will usually be an acquisition of “sensitive land” under
incorporated outside New Zealand;
the Act. An acquisition of “sensitive land” includes acquiring a
• a body corporate that is not a New Zealand listed issuer and 25% or more interest (or increasing an existing 25% or more
an “overseas person” has or “overseas persons” have: interest where that increase passes a “control interest limit”)
͵ 25% or more of a class of securities; in a person or entity that owns or leases “sensitive land”.
͵ the power to control the composition of 25% or more of
the governing body; or What is an acquisition of “significant business assets”?
͵ the right to exercise or control the exercise of 25% or An acquisition of “significant business assets” includes:
more of the voting power at a meeting; • acquiring a 25% or more interest (or increasing an existing
• a New Zealand listed issuer where: 25% or more interest where that increase passes a “control
interest limit”) in a business where the consideration
͵ an “overseas person” or “overseas persons” have a
paid for the New Zealand part of the investment exceeds
beneficial interest in 50% or more of the issuer’s
NZ$100 million;
securities; or
͵ at least one “overseas person” has a beneficial • acquiring a 25% or more interest (or increasing an existing
entitlement to 10% or more of any class of the issuer’s 25% or more interest where that increase passes a “control
securities which confer control rights and all such persons interest limit”) in a business where the value of the
together have 25% or more of the voting power at a New Zealand assets of the business exceed NZ$100 million;
meeting of the issuer or the right to appoint 50% or more • acquiring any property in New Zealand (including goodwill
of the board; and and other intangible assets) for more than NZ$100
• partnerships, unincorporated joint ventures, other million; or
unincorporated bodies, trusts, unit trusts managed • establishing a business in New Zealand where the
investment schemes or limited partnerships, where relevant expenditure incurred exceeds NZ$100 million.
overseas ownership or control thresholds are exceeded.
The NZ$100 million threshold is increased to NZ$552 million
What is “sensitive land”? under certain circumstances for Australian non-government
investors, and NZ$200 million for investors in certain
“Sensitive land” includes a freehold interest, a leasehold
countries that have trade agreements with New Zealand
interest in residential land of three years or more, or a
(including countries which are party to the Comprehensive
(non-residential) leasehold interest of ten years or more in
and Progressive Agreement for Trans-Pacific Partnership).
land of the following types:
Associates
non-urban land areas greater than five
Investments by an "associate" of an “overseas person” are also
hectares (eg farms);
captured by the Act. The concept of association includes
situations of control, agency, acting jointly or in concert and
r esidential land, being property categorised participation in an overseas investment as a consequence of
as “residential” or “lifestyle” under the relevant "any arrangement or understanding".
district roll;
Overseas Investment Regulation in NZ September 2021Exemptions How do you obtain OIO consent?
Certain transactions do not require consent, including
transactions that are part of a restructure within a group and Application
the transfer of certain debt obligations. The application of the The process starts with the investor submitting an application
exemptions is narrow, fact-specific, and you should always to the OIO (in the prescribed form). The investor pays an
seek legal advice before relying on an exemption. application fee once the OIO has received all information it
requires and has accepted the application for assessment.
Control Interest Limit
A stakeholder will pass a “control interest limit” - and therefore These application fees range depending on the nature of
will need consent - if they move from an interest of: the application. To give an indication, a fee of NZ$38,800 is
payable in respect of “significant business assets” applications
Between 25% and 49.99% 50% or more and NZ$68,200 - $146,200 for “sensitive land” applications
(which includes significant business assets applications with a
Between 50% and 74.99% 75% or more land element). The level of fee for sensitive land applications
depends on whether the decision is delegated to the
Between 75% and 99.99% 100% Regulator or decided by the relevant Ministers and whether
the application is classed as simple or complex.
Call-in power Applications are now filed using the OIO’s online application
webforms. A list of the information required for each of the
Even where a transaction does not require consent, if it is an
investment pathways is available from the OIO but, because
“overseas investment in Strategically Important Business (SIB)
every investment is different, the OIO recommends investors
assets” the relevant government minister can review that
seek legal advice for an application at an early stage.
transaction, apply conditions and even prohibit or insist the
transaction be unwound.
Investment Pathways
An “overseas investment in SIB assets” is the acquisition, Broadly, there are the four categories of investment pathways,
by an “overseas person”, of: each with different requirements:
a ny securities in a person who is directly or S ignificant business assets
indirectly carrying on a SIB (noting that there Applicants must meet the benefit to
are specific rules for media businesses and New Zealand test.
listed issuers); or
S ensitive land
roperty in New Zealand used in
p Applicants must meet the benefit to
carrying on a SIB. New Zealand test.
esidential land
R
The term “SIB” is closely defined in the Overseas Investment Applicants must meet the benefit to
Act and associated regulations and includes producers New Zealand test, increased housing test,
of military or dual use technology, key utilities, and non-residential use test, or demonstrate
businesses which hold sensitive information on significant a commitment to reside in New Zealand.
numbers of people.
F orestry
In most circumstances, an “overseas investment in SIB assets” Applicants must meet the special
may be notified to the relevant government minister in forestry benefits test, modified benefits
advance, to seek a pre-approval. Where the acquisition relates test or benefit to New Zealand test.
to military or “dual use” technology or is of an entity which
has been named as a “critical direct supplier”, the transaction Standing consents are available for forestry and residential
must be notified. land developments. If granted, this allows investors to apply
for consent before identifying the property they want to
Notifications of “overseas investment in SIB assets”
buy. A standing consent covers a predetermined number of
are submitted through the OIO’s online webforms.
transactions and has a use-by date.
After becoming aware of a transaction, the OIO makes an
initial assessment, usually within 15 working days.
Timing
If the initial assessment shows that an investment could pose Typically, the timeframe will vary, depending on the nature
a significant risk, a full assessment will be completed and of the application, with the more complex “sensitive land”
referred to the Minister of Finance for decision. Decisions applications taking longer. To provide an indication, on the
must be made within 55 days, with a possible extension of a basis of recent experience, we expect an application to
further 30 days. take around:
• 5 – 6 months for a “significant business asset
application”; and
• 7 – 10 months for a “sensitive land” application.
Overseas Investment Regulation in NZ September 2021Statutory timeframes are due to be introduced into the regime Character factors include:
on 24 November 2021, which will provide greater certainty
and accountability.
Convictions resulting in imprisonment
or significant fines.
National Interest Test
The OIO will not give consent to a transaction where it orporate fines both in New Zealand
C
considers the transaction is contrary to the national interest. and overseas.
Whilst the test is largely discretionary, relevant factors
for determining national interest include whether the target
business operates a strategically important business or
Being ineligible to come to New Zealand.
if the investor is partially or fully owned or controlled by a
foreign government.
Matters in an OIO consent application Capability factors include:
Benefit to New Zealand Test
Prohibitions on being a director, promotor,
or manager of a company.
Generally, if the investment involves an interest in
“sensitive land”, the applicant must demonstrate that
the purchase will bring a net benefit to New Zealand.
There are exceptions or modifications to this test for some Penalties for tax avoidance or evasion.
investment pathways, including forestry. The OIO looks
at a number of factors when assessing an acquisition of
sensitive land, including whether the investment will: Unpaid tax of NZ$5 million or more.
• create new job opportunities;
• introduce new technology, or managerial or technical The relevant “overseas person” and all individuals with control
skills to New Zealand; of the relevant “overseas person” must meet the investor test.
New Zealanders do not need to meet the investor test.
• increase export receipts or develop new export markets
or increased market access; Repeat investors who have met the new investor test will
• add to competition, and create greater efficiency not need to satisfy the investor test each time they apply for
or productivity; consent (provided there are no substantial changes since the
last time they obtained consent).
• enhance services available or increase processing of
primary products in New Zealand; or An investor can utilise a “standalone investor test”, which does
not apply to a specific transaction, but screens the investor
• introduce into New Zealand additional investment
with the view to speeding up future consents and giving the
for development purposes.
investor greater certainty.
To assess a number of the above factors relevant to
determining the benefit of an investment, the OIO applies Inland Revenue Information
a test known as the “counterfactual test”. This test assesses Investors applying for consent to invest in a “significant
the difference between the benefits to New Zealand business asset” must now provide tax information as part of
“with” the proposed investment and what would happen their application. This information will be passed directly to
anyway “without” the proposed investment (for example, Inland Revenue (the NZ tax department).
if a New Zealand buyer acquired the land). See below
for upcoming changes to the benefit to New Zealand test. Special Rules for Farm Land, Waterways and Foreshore
The applicant must provide an investment plan and If an “overseas person” wishes to acquire farm land, or shares
supporting statements detailing how it will manage any in a company owning farm land, that land must be marketed
“sensitive land” going forward. This document is an important for sale in New Zealand for 20 working days (to persons
touchstone, as compliance with the plans set out is almost who are not “overseas persons”) before the OIO is able to
always a condition of consent. consent to the purchase by an “overseas person”. The Crown
has a right of first refusal to purchase certain “special land”
Investor Test which constitutes the beds of certain waterways or foreshore
and seabed land.
The investor test sets out the types of behaviour and
history the OIO considers show that the overseas investor
is likely to pose a risk to New Zealand. It is made up of two Ongoing Monitoring of Compliance
groups of factors: character and capability. The OIO monitors the activities of the “overseas person”
post acquisition to ensure that the investor is complying
with the law, any representations made in its application for
consent, and any conditions of consent imposed by the OIO.
Overseas Investment Regulation in NZ September 2021A common condition of consent is that the applicant (or the Upcoming changes
individuals exercising control over the applicant) continue
to meet the investor test. There are ongoing reporting 24 November 2021
requirements around this and other conditions of consent The following changes will come into effect on
(for example, those directly relating to the benefits of the 24 November 2021:
investment for New Zealand, such as increased employment
and further development). • the law will prescribe timeframes for decisions on
applications and notifications to be made;
The Act sets out various penalties for non-compliance
• farm land advertising requirements will be strengthened
with its provisions. These include fines of up to NZ$500,000
with amended provisions relating to exemptions and
for an individual or NZ$10 million for a body corporate for
alternative forms of advertising; and
proceeding with an overseas investment without obtaining
the required consent and fines of up to NZ$100,000 for • investors will be required to offer fresh or seawater areas
failing to comply with consent conditions. In cases of (formerly “special land”) to the Crown if acquiring a freehold
serious non-compliance, the OIO can seek court orders for interest. The Crown must acquire this land unless an
disposition of property. exception applies.
Approx. 24 May 2022
The following changes will come into effect no later than
24 May 2022:
• the benefit to New Zealand test will be simplified to
consider 7 broad factors, rather than 21 specific factors.
Changes also include further protection for sites of
significance to Māori, a higher benefit threshold for
farm land and standardised benefit test for fisheries
investments; and
• the counterfactual requirement will be simplified to
compare the benefit of the investment to the status-quo.
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Grierson 2021.
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