New Zealand legal and accounting and tax considerations in 2023
Corporate tax regime
- All tax resident New Zealand companies must pay corporate tax on their worldwide and New Zealand-sourced income, at a standard rate of 28%. Businesses are required to submit their tax filings by 31st March and to pay provisional tax on 15th January, 31st March and 7th May;
- Look Through Companies (LTCs) (LTCs) are currently not subject to corporate income tax. However, New Zealand companies owned majority by foreigners and receiving more than NZ$15,673 (US$10,000) of foreign sourced income will no longer be allowed to apply for look through status;
- It is mandatory for a trading New Zealand entity to register for Goods and Services Tax (GST) if it meets the following criteria: i) The company carries out taxable activities and the annual turnover is at least NZ$60,000 (US$38,212) for the past 12 months or expected to be at least NZ$60,000 (US$38,212) in the next 12 months or ii) The company carries out taxable activities and is charging GST on the goods/services it is providing to its customers;
- Earnings made by branch offices are subject to taxation at the standard rate of 28%;
- The standard goods and services tax rate is 15%. All companies with sales over NZ$60,000 (US$38,212) must register for a GST number and file monthly returns by the 28th of the following month;
- Dividends received by a New Zealand business are tax-exempt if the distributing company is based abroad or is a 100% owned NZ subsidiary;
- Just like Australia, capital gains arising from the sales of listed shares and other securities are not taxed in New Zealand;
- All New Zealand businesses can carry forward their losses indefinitely;
Withholding tax and tax treaties
- Dividends paid to non-residents are subject to a 30% withholding tax. This rate can be minimized if i) the distributing company has paid tax on related earnings ii) its parent company holds 10% of its share capital and iii) double taxation treaties;
- A New Zealand company is also subject to withholding tax on royalties and interest payments made to non-resident at a rate of 15%, unless reduced by double taxation avoidance treaties;
- New Zealand has signed double taxation avoidance agreements (DTAAs) with 40 countries, including Australia, China, France, India, Singapore, United States, the UK and the UAE;
- Tax information exchange agreements (but no DTAA) have also been entered with the following jurisdictions: Cayman Islands, Cook Islands, Curacao, Gibraltar, Guernsey, Isle of Man, Jersey, Marshall Islands, Netherlands Antilles, Niue, Sint Maarten.
Miscellaneous tax information
- New Zealand does not have any inheritance tax or wealth tax;
- Transactions between New Zealand entities (or branches) and related foreign entities are subject to transfer pricing rules including i) determining the cost of any cross-border supplies and ii) transfer pricing adjustments;
- Employees are required to make contributions to the Accident Compensation Fund of up to 3% of their employees’ gross salaries. Housing allowance and other fringe benefits are also subject to tax at a 49% rate;
- A company is deemed as tax resident in New Zealand if it has been incorporated in New Zealand. This also applies to Look Through companies. New Zealand additionally applies CFC rules: foreign companies in which New Zealanders own 50% of the shares and/or comprise the majority of the directors are deemed as controlled from New Zealand and hence subject to local corporate income tax;
- Despite being able to register a New Zealand company in just two weeks, our multi-national Clients can only issue invoices to customers once the company is tax registered. Unfortunately, it takes on average eight weeks to open a corporate bank account. Two weeks after that, the New Zealand government will issue tax numbers for the company.
- It is important that our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile; and that they fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations;
Foreign Investor Regulations
- Government approval for investments is only required when foreigners/foreigner owned companies invest in i) business assets worth US$100 million ii) fisheries quota and iii) sensitive land. Applications for investment approval will be submitted to the Overseas Investment Office (OIO);
- Branches of foreign companies and NZ incorporated large companies with more 25% ownership will also be required to submit their financial statements for independent annual audits, before submitting these documents to the Registrar of Companies;
- New Zealand no longer follows a system of import licenses. Instead, there are high tariffs imposed on certain goods, based on the item and the country of origin. Furthermore, certain goods including armaments, endangered flora & fauna, drugs and perishable food cannot be imported to New Zealand;
- New Zealand has increased penalties against i) false or misleading advertising ii) bait advertising iii) fees hidden in small prints and iv) other unfair trade practices, which may be subject to i) a fine of up to US$500,000 and ii) full refund for customers;
- The New Zealand Commerce Commission forbids businesses to engage in price rigging and concerted practices. Convicted businesses are subject to penalties including a fine of up to US$8 million.
Financial companies’ regulation
- Like other companies, financial companies must be registered with the Companies Office, but appear on a separate public register which enable users to view what type of financial services the company is allowed to provide;
- All companies providing financial services are required to register with a government approved dispute resolution scheme which sets how commercial disputes must be solved;
- Healy Consultants recommends caution when using a NZ company without an FSP license to provide financial services out of New Zealand. The Financial Markets Authority considers such “offshore financial businesses” as scams, subject to i) instant deregistration ii) inscription on a blacklist and iii) a fine of up to US$600,000;
- While New Zealand has become a very attractive location for financial companies, regulation is tight, complex and strictly enforced. Navigating through it requires expert advice. Please consult our financial service provider licenses section for further information and feel free to contact our New Zealand CRO to share your business ideas.
- All companies in New Zealand are required to appear on the country’s companies registrar. Details such as i) their current address ii) identity of their shareholders and directors can be viewed online;
- All companies in New Zealand are required to file an annual return to the Companies Office confirming i) their address ii) the identity of their directors and shareholders and iii) pay a registration renewal fee;
- All companies must also i) keep records of their income and expenses and ii) file financial statements with the Inland Revenue Department every year, unless both their revenue and expenses have not exceeded US$24,000. In such case, only a self-assessed tax return is needed;
- Financial statements must be audited if the company is a i) public limited company (open limited liability companies) ii) a large LLC with over 25% of its share capital foreign-owned or iii) the branch of a foreign company;
- A New Zealand company is exempt from preparing an audited financial report if it meets any two of the following criteria:
- Total assets of the company (including intangible assets) do not exceed NZ$1,000,000 at financial year end (reporting date);
- Total company sales do not exceed NZ$2,000,000 per year;
- The company has maximum of five full-time employees.
- New Zealand furthermore implements automatic exchanges of information with foreign tax authorities on assets and earnings of people and businesses suspected of tax evasion.
- All employment contracts must be put in writing in New Zealand. Employers must also keep separate records of i) the hours worked by all employees ii) their wages and iii) all leave granted;
- Employees are required to pay a minimum monthly wage of i) US$1,099 for employees under 19 years old and ii) US$1,727 for older employees;
- All employees are entitled to i) 20 days of paid leave ii) 11 days of paid public leave and iii) 5 days of sick leave, increasing to 10 after 1 year of employment;
- While New Zealand labor law does not set a notice duration for dismissal, employers give a 1 month notice and a written explanation letter when dismissing an employee, to protect themselves against personal grievance claims;
- Employers are required to make contributions to the Accident Compensation Fund of up to 3% of their employees’ gross salaries. They however do not have to provide health insurance and other social benefits, as their employees are already covered under the New Zealand Social Security system;
- New Zealand law bars discrimination in matters of employment on the grounds of age, gender, sexual preferences, ethnicity or race, religion and political and union views.
- The New Zealand Commerce Act 1986 prohibits activities such i) price fixing arrangements and ii) resale price maintenance to force competitors from the market. In case, the Commerce Commission suspects lack of competition in the market, they may impose measures such price controls;
- All corporate mergers and acquisitions (M&A) must be approved by the New Zealand Commerce Commission. Companies participating in M&A activities must follow the Commerce Commission’s guidelines closely;
- When trading in New Zealand, our Clients will be required to abide by the provisions of the Fair Trading Act, which intends to reduce deceitful business practices. Furthermore, this act sets out possible courses of actions for customers in order to seek redress for their grievances;
- Generally, there are no foreign exchange controls in New Zealand. However, cash worth NZ$10,000 or more must be declared if transferring out of the country;
Buying and developing property
- Generally, there are very few restrictions appertaining to purchase of property in New Zealand for both local and foreign individuals or entities. However, under the Overseas Investment Act 2005, restrictions apply to certain parcels categorized as ‘sensitive land’ and potential buyers must adhere to certain laid down ordinances prior to purchasing;
- Developing property in New Zealand, be it starting a new building or refurbishing an already existing establishment, is governed by both the Building Act 2004 and the New Zealand Building Code. Upon completion of a building project, a developer is issued with a Code Compliance Certificate (CCC) provided the relevant city council is satisfied that the completed building works conforms to the original building consent.
- Every company registered in New Zealand (including overseas entities) is required to prepare and file an annual return with the New Zealand Company Registry. If the company fails to file the annual returns before the due date, the New Zealand Company Registry can remove the company from the register.
- After the company has been incorporated, the New Zealand Company Registry will set the due date of filing for the company’s annual return. The due date will apply each year. The due date can be changed free of charge through the New Zealand Company Registry portal.
- The company is not required to file an annual return in the first calendar year following incorporation with the New Zealand authority. For example, if the entity was incorporated in 2022, the company is required to file its first annual return in 2023.
- The government fee to file an annual return for a company that is not incorporated in New Zealand is NZ$ 52.20 (including GST).