Nelson in Focus

Foreign Direct Investment Regime

New Zealand welcomes and encourages foreign direct investment (FDI) from most countries.

Overseas Investment Act

The Overseas Investment Act 2005 establishes the framework for the administration of Government policy on foreign investments. The public policy objectives of the Act include encouraging foreign investment, into New Zealand, providing rules that recognise the importance of foreign direct investment and ensuring that the value of sensitive New Zealand assets are recognised and enhanced by an overseas owner.

The Overseas Investment Office (OIO) is tasked with managing New Zealand’s foreign investment regime. While 100% overseas ownership can be approved in all industry sectors, some New Zealand-based companies have restrictions relating to foreign ownership.

Controls, in the form of a screening and monitoring process operated by the OIO, are maintained over investment regarded as ‘significant’ - i.e. where an overseas person acquires or establishes (or acquires a 25% or more ownership or control interest in):

• Business or non-land assets in New Zealand worth more than $100 million
• Non-urban land over five hectares
• Any land on most offshore islands or land that is or includes the foreshore or seabed
• Land over 0.4 hectares, which includes or adjoins certain ‘sensitive’ areas
• Land over 0.2 hectares which adjoins the foreshore

Applications for land purchase

Applications involving land will be approved only if the investor is intending to reside in New Zealand indefinitely; or if the investment benefits New Zealand or a group of New Zealanders. In the case of rural land the benefits must be substantial and identifiable. There are a range of factors considered in determining whether an investment will, or is likely to, benefit New Zealand. These include:

1. Whether the investment is likely to result in:

• the creation of new job opportunities in New Zealand or the retention of existing jobs
• the introduction of new technology or business skills
• increased exports
• added market competition, greater efficiency or productivity
• additional investment for development purposes
• increased processing of primary products

2. Whether there will be adequate mechanisms in place for:

• protecting areas of significant indigenous vegetation or indigenous fauna
• protecting or enhancing significant habitats of trout, salmon, wildlife and game and providing walking access to those habitats by the public
• protecting or enhancing historic heritage within the relevant land
• providing walking access over the relevant land or a relevant part

3. If the relevant land contains foreshore, seabed, or a bed of a river or lake, whether it has been offered to the Crown

4. Whether the overseas investment will benefit New Zealand - e.g sponsorship of community projects

5. Whether the investor is a key person from a country where New Zealand will benefit from having improved relations.

New Zealand Trade and Enterprise is the New Zealand Government's economic development agency. Investment New Zealand, a specialist unit within New Zealand Trade and Enterprise, works to attract investment into New Zealand which will provide wider benefits to the New Zealand economy. Investment New Zealand can help identify sustainable business prospects and develop tailored investment solutions for overseas investors. Other government departments and agencies, such as Tourism New Zealand, the Ministry of Foreign Affairs and Trade, and the Ministry of Economic Development, are also active in promoting foreign investment.

Information about the overseas investment regime can be found at the Overseas Investment Office.

New Zealand’s Tax System

When setting up a business in New Zealand, Inland Revenue has several resources that you will find useful. All these resources are available from their website at www.ird.govt.nz, or by phoning Inland Revenue on 0800 377 774 and asking them to post the information.

Different income tax rates exist in New Zealand for different entities. For example, the company tax rate is 30%, but personal tax rates are scaled with the highest being 39%.

Every business needs an IRD number and a GST (Goods and Services Tax) number. If the business’s annual turnover will exceed $40,000 then it will be required to register for GST. The IR365 booklet ‘GST - do you need to register?’ explains the advantages and disadvantages of registering, and what to do to register. It also includes a GST registration form. For any information on GST, phone Inland Revenue on 0800 377 776. The Inland Revenue also has tax advisory notices that may be able to help when setting up a business. They can be requested when registering for GST or by phoning Inland Revenue on 0800 377 774.

The Smart Business booklet IR 320 contains information about record-keeping requirements, income tax, provisional tax and other information to help get started in business.

For those in Australia considering doing business in New Zealand, further information is available on the New Zealand Inland Revenue website, www.ird.govt.nz

Want to know more?

Overseas Investment Commission:

www.oic.govt.nz

Investment New Zealand:

www.investnewzealand.govt.nz

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