Business entities in New Zealand in 2021
Healy Consultants will assist our Clients engineer the optimal New Zealand corporate structure. There are several ways of doing business in New Zealand, the most common being the setting up of an LLC. Alternatively, our foreign Clients can also establish a look-through company or, if they already run a foreign company, a branch and a representative office.
Doing business in New Zealand with a local entity
The New Zealand limited liability company (closed limited company)
- Multinationals wishing to set up a subsidiary in New Zealand will use the simple limited liability company requiring i) paid up share capital of just US$1 and ii) just 1 shareholder and 1 director but iii) one resident director (Australia or New Zealand). The registration process with the New Zealand Companies Office is straightforward and can be completed within 1 week. Such type of business entity is also the perfect choice for a foreign corporation willing to register a subsidiary in New Zealand;
- After New Zealand company setup, annual audited financial statements and tax returns are to be submitted to the Inland Revenue Department. A New Zealand limited liability company is considered resident for tax purposes, so corporation tax on all its net profits amounts to 28%;
- Best uses: the New Zealand limited liability company is a flexible vehicle to do business in New Zealand and is almost always fit for the expected activities of our Clients.
The New Zealand public limited company (open limited company)
- To give their company a marketing edge, Healy Consultants recommends our Clients establish a New Zealand PLC instead of an LLC, which can be done just by allowing for the issuance of new shares in the company’s articles of incorporation. There are no additional administrative or capital requirements compared to an LLC. Corporation tax on net profits also amounts to 28%;
- Best uses: the New Zealand public limited company is fit when our Clients are planning to finance their business by raising capital through private/public equity issuance.
The New Zealand “look through company”
- Important notice: from April 2017 onwards, foreigners will be able to register New Zealand look through companies only if i) they own less than 50% of the shares of such company or ii) if the company is receiving less than US$10,000 of foreign sourced income. If otherwise, the company (including existing ones) will automatically convert to a standard limited liability company;
- A look through Company is a New Zealand business entity very similar to a limited liability company: it is also constituted through the setup of a simple New Zealand limited liability company, with a maximum of five shareholders, who all must be individuals. Like a New Zealand LLC, this business entity however requires one New Zealand or Australia resident director It is also mandatory for the company to disclose information re its shareholders and directors to a public register;
- Our Client must submit a Look Through Company Election form to the New Zealand Tax Department. This certificate is known as the “Look Through Company” status, providing for legal tax-exemption of the company. Due to LTC status, owners will have to include the company’s earnings in their personal income tax returns;
- Best uses: we currently do not recommend our Clients to setup LTCs in New Zealand, due to the uncertainties created by the regulatory changes described above.
The New Zealand limited partnership
- A New Zealand limited partnership can be registered by a minimum of two partners, amongst whom at least one general partner who will be subject to unlimited liability against the partnership’s losses. It is however possible to appoint a corporate as general partner so that the beneficial owner(s) still enjoy limited liability. The other “limited” partners are only liable to their contribution to the partnership;
- Partnerships are tax transparent entities, in the sense that all earnings channeling through them are subject to income tax when they are distributed to the partners, at the end of the partnership’s financial year. Partnerships are still required to prepare and file an annual tax return, and may be also required to register for GST;
- It is also possible to register in New Zealand an overseas partnership. Unlike New Zealand limited partnerships, there is then no requirement to appoint a general partner ordinarily resident in New Zealand, provided that the overseas partnership has one resident representative in New Zealand;
- Best uses: using a limited partnership is a good solution when our Clients already have a local partner willing to act as general partner. It is also possible to register a branch of an overseas partnership, as described above.
The New Zealand foreign trust
- Trusts are most commonly used by our Clients i) in need of wealth management services or ii) willing to provide such services. This contract enables to transfer property over assets such as i) real estate ii) shares and other securities and iii) art, antiques jewelry and other kind of alternative assets. The trust agreement will appoint i) a “trustee”, who will manage these assets in accordance with the trust’s rules and ii) “beneficiaries” receiving earnings generated by the assets and who may include the assets’ initial owner(s), but also other people;
- Our Clients may also choose to register a private trustee company (PTC) in order to provide i) wealth management services to their Clients and ii) raise and invest funds. The private trustee company, a subtype of limited liability company serving as a trustee for one or many trust agreements, is indeed very easy to setup in New Zealand;
- In accordance with the New Zealand Trustee Act of 1956, a New Zealand trust must have at least one individual or professional licensed trustee in New Zealand from the date of its formation. Healy Consultants Group PLC will supply a professional New Zealand resident trustee to manage the trust assets on our Client’s behalf;
- The trustee’s responsibilities include i) day-to-day management of the trust’s assets ii) managing trust distributions iii) accepting new trust assets iv) maintaining the trust’s statutory records and v) conducting the trust’s annual review. Our annual trustee fee is the standard fee for a standard, vanilla trust;
- For more complex structures, trust management services or assets of high-risk nature, Healy Consultants Group PLC may revert for additional fees for professional trustees services;
- Healy Consultants Group is happy to assist in setting up a New Zealand trust for our Clients for a fee of US$35,750 (link to invoice). Prices quoted are applicable to trusts with total assets of less than US$5 million;
- Each foreign trust is required to complete i) FTDR return filing ii) compliance reporting and iii) tax filing to New Zealand Inland Revenue Department. If required, Healy Consultants Group can assist in preparing financial statements, tax returns and filings, assist in completing compliance reporting, and preparing the FTDR return & filing;
- Best uses: setting up a New Zealand trust is an efficient way to reduce taxation for our foreign Clients as foreign-sourced assets and earnings remitted to a trust will be 100% tax exempt in New Zealand, as long as the income generated by the trust is not distributed to the beneficiaries. Endowing their assets to a trust will also protect their assets against i) inheritance tax ii) potential expropriation by their country’s government and iii) potential claimants in business and family disputes.
Doing business in New Zealand with a foreign entity
The New Zealand branch office
- New Zealand’s Companies Act allows foreign companies to register branch offices in New Zealand, with an independent management team and a corporate bank account based in the country. Registration of this business entity follows similar procedures to those involved for the setup of a limited liability company, including the need to provide the authorities with i) a registered address and ii) a resident administrative agent;
- All New Zealand branch offices are required i) to provide the company register with an annual update regarding the branch’s particulars and ii) to file annual audited financial statements including both the branch’s accounts and its parent company’s. New Zealand sourced income of a branch of a foreign company is subject to local corporation tax of 28%;
- Best uses: registration of a branch of a foreign company in New Zealand can be a good option in regulated industries, such as banking, insurance and financial services.
The New Zealand representative office
- New Zealand representative offices are only allowed to engage in i) market research and ii) promotion of the business of the parent company. While representative offices are exempted from corporate tax in New Zealand and do not need to register for tax, they are still required to i) register with the Companies registrar ii) appoint an administrative agent and iii) submit annual audited financial statements to the authorities. Because no sales income is permitted, no corporation tax is payable by New Zealand representative offices;
- Best uses: it usually makes more sense to register a limited liability company in New Zealand as such entity is more flexible and will be allowed to trade immediately if needed, while a representative office will be required to convert first into a branch.
Table of comparison between tax resident New Zealand entities
|Operations and Logistics||LLC||LTC||PLC||Overseas LP||Trust||Branch||RO|
|Doing business in New Zealand permitted?||Yes||Yes||Yes||Yes||No||Yes||No|
|Allowed to sign contracts with local Clients?||Yes||Yes||Yes||Yes||No||Yes||No|
|Allowed to invoice local Clients?||Yes||Yes||Yes||Yes||No||Yes||No|
|Can rent local office premises?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||No||Yes||No|
|Allowed to export goods?||Yes||Yes||Yes||Yes||No||Yes||No|
|Accounting and tax||LLC||LTC||PLC||Overseas LP||Trust||Branch||RO|
|Corporate tax rate on local sales?||28%||0%||28%||28%||N/A||28%||N/A|
|Corporate tax rate on global sales||28%||28%||28%||28%||N/A||28%||N/A|
|Corporate bank account?||ANZ||DBS Singapore||ASB Bank||HSBC Hong Kong||Citibank||Westpac New Zealand||Westpac New Zealand|
|Statutory audit required?||No||No||Yes||Yes||Yes||No||No|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Access to DTAAs?||Yes||No||Yes||Yes||Yes||Yes||No|
|Company law||LLC||LTC||PLC||Overseas LP||Trust||Branch||RO|
|Issued share capital required?||US$1||US$1||US$1||US$2||None||None||None|
|Resident director/representative required?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Resident bank signatory required||No||No||No||No||No||No||No|
|NZ shareholder required?||No||No||No||No||No||No||No|
|Minimum number of directors?||1||1||1||2||1||1||1|
|Minimum number of shareholders?||1||1||1||2||1||Parent company||Parent company|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||Yes||No||No|
|Corporate director(s) allowed||No||No||No||No||No||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Can the entity hire expatriate staff?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|How long to get work permit approved||1 month||1 month||1 month||1 month||N/A||1 month||1 month|
|Fees and timelines||LLC||LTC||PLC||Overseas LP||Trust||Branch||RO|
|How long to set the entity up?||1 week||2 weeks||2 weeks||2 weeks||2 weeks||1 week||1 week|
|How long to open corporate bank account?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Estimate of engagement costs||US$8,740||US$9,590||US$8,830||US$9,200||US$35,750||US$10,330||US$18,530|
|Draft invoice||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF|
Frequently asked questions
How much time will I need to set up my business in New Zealand?From the submission of a complete application, New Zealand business setup takes on average less than a week.
Do I need to appoint a resident director to comply with New Zealand company setup requirements?Yes, a resident director is necessary to set up a company in New Zealand. Our Firm can assist our Clients with setting up a business in New Zealand by providing them with nominee services until they hire a permanent employee to assume such role.
How do I setup a limited liability company in New Zealand, without paying tax on my company’s worldwide income?This can be done through the setup of New Zealand private limited company and the application for look through company status, provided i) the company does not conduct commercial operations with New Zealand customers and ii) the company owners do not reside in New Zealand.
Is it costly to start a business in New Zealand?No, government fees are limited to a few hundreds of US$ to start an LLC in New Zealand. Kindly refer to our timelines and fees page for additional details regarding New Zealand business setup costs.