Doing business in A GUIDE FOR INVESTORS July 2021 Contents

About Chapman Tripp Taxation within New Zealand Financial services 1 19 37 in New Zealand

New Zealand at a glance New Zealand’s cross- 2 22 border tax regime Investing in New Zealand’s 42 capital markets Overseas investment 4 in New Zealand Contract law in New Zealand 25 Fundraising in New Zealand 44 Establishing a business Consumer protections 7 in New Zealand 26 in New Zealand Insolvency in New Zealand 46

Buying and developing real Employment and health and Resolving disputes 9 estate in New Zealand 29 safety law in New Zealand 48 in New Zealand

Environment and Anti-trust, competition Emigrating to New Zealand 14 resource management 32 law in New Zealand 50 law in New Zealand

Intellectual property New Zealand Māori and 34 in New Zealand 17 the Treaty of Waitangi

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

Chapman Tripp, New Zealand’s leading law firm, can offer you a national, full-service team. Our advice is clear and Established in 1876, we have a reputation for excellence and a long track record of delivering innovative, commercial solutions which respond to the individual needs of our clients. commercial.“ We help you mitigate risk and Our advice is clear and commercial. Chapman Tripp has an international This guide is designed to provide maximise your investment We help you mitigate risk and maximise client base and has been involved in the prospective investor with an your investment through all phases of some of the most high profile Overseas introduction to New Zealand’s legal through all phases of your your business venture – from evaluating Investment Office applications of framework. The information is accurate potential investment opportunities recent times. We play a key role in at the time of publication but is business venture. and acting on acquisitions through to mergers and acquisitions, banking, necessarily high level and generic, so advising on the most efficient way to financing, insolvency, restructuring, should not be relied upon as a basis for structure your business, the day-to- procurement processes, large decision-making. day operational issues you need to be scale infrastructure projects and aware of and, should it eventuate, how dispute resolution. We recommend you speak to us about ” to achieve a successful exit strategy. your investment requirements before We have 55 partners and around 450 making any decisions – so that we can We also help you to make sense of the staff with offices in (the provide you with advice that is specific New Zealand regulatory and cultural economic centre of New Zealand to your needs. Chambers NZ Law Firm environment. We will represent your and home to more than a third of the business interests to relevant regulatory population), (the seat of You can read more about our firm at of the Year bodies, including the Overseas government) and (the chapmantripp.com Chambers 2021 Investment Office, and will guide you South Island’s commercial hub). through the resource management consent process and the best approach New Zealand Deal Firm for dealing with Māori law. of the Year Australasian Law Awards 2021

New Zealand Law Firm of the Year KangaNews Awards 2020

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 1 New Zealand Geography Culture Economy New Zealand is situated in the South New Zealand culture values fairness, New Zealand is a safe place to invest Pacific Ocean, with a land area ingenuity, practicality, modesty, and is currently ranked first of 190 at a glance equivalent to Japan or Britain. We have restraint and informality. English is countries by the World Bank for ease of one of the largest exclusive economic the everyday language but Māori and doing business. zones in the world at 4.1 million sign language are also recognised as square kilometres. official languages. Major exports include dairy products, meat, timber and minerals. We New Zealand consists of two main We aspire to be a multi-cultural society also have developing industries in islands – the North Island and the South but accord a special significance to export education, boat building, IT, Island. It has a temperate climate and Māori culture, reflecting that Māori are horticulture, wine and film. offers a high quality of life with clean air the indigenous people of this land. and easy access to nature. Our stock exchange is the first in the world to open trading each day – two Political and legal system hours ahead of Sydney, three hours Population ahead of Tokyo, four hours ahead of New Zealand is consistently rated in the Beijing, 12 hours ahead of London and The resident population is just over top four by Transparency International 17 hours ahead of New York. five million, one third of whom live for freedom from corruption. We in Auckland. have a common law legal system The currency is based on the based on the British model, with an New Zealand dollar, which is freely independent judiciary. New Zealand is a nation of migrants, floated against all major currencies. with one of the most ethnically diverse populations in the world and a large New Zealand has a stable parliamentary “ex-pat” community that provides democracy with a proportional voting Free trade agreements important international linkages. system which usually (but not always) produces coalition governments. New Zealand supports trade The two major parties, which would liberalisation and is party to a large generally lead a coalition government, number of free trade agreements, are National at the conservative end of including with Australia, China, the spectrum and Labour at the liberal Hong Kong, Chinese Taipei, South end. Korea, ASEAN, Singapore, Thailand, Malaysia, Brunei and Chile. We are also Currently, we have a Labour signatories to the Comprehensive and Government that includes two Ministers Progressive Trans-Pacific Partnership outside Cabinet from the Green Party. and to the Regional Comprehensive Economic Partnership (RCEP). The British sovereign is the titular Head of State and is represented in New Zealand by a Governor-General.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 2 DecemberJuly 2021 2019 HOME 2 Information on New Zealand’s international trading agreements can be found on the Ministry of Foreign Affairs and Trade website: mfat.govt.nz

ALERT Want to know more?

Go to:

newzealand.com or newzealandnow.govt.nz/investing-in-nz or nzte.govt.nz/en/invest/

New Zealand currently rates number two “by Transparency International for freedom from corruption. ”

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 3 Overseas Key points When is consent Residential land • New Zealand recognises the positive required? The sale of residential property, economic and social contribution including lifestyle blocks and unit titles, Overseas Investment Office (OIO) investment in foreign investment brings to is restricted to: consent may be required if the target New Zealanders. business possesses any of the following: • New Zealand citizens and persons New Zealand • New Zealand consistently ranks “ordinarily resident in New Zealand” highly as an attractive investment significant business assets – where • (which, in this context, means destination, with various studies the cost of a business acquisition, holding a permanent resident visa, identifying the ease of doing or the value of the applicable having resided in New Zealand for at business, low level of corruption, New Zealand assets, exceeds least a year and having been present high quality of regulations NZ$100 million. Non-government in New Zealand for at least 183 days adherence to the rule of law, investors from all Comprehensive in the past year) significant investor protections, and Progressive Trans-Pacific and protection of personal Partnership (CPTPP Agreement) • individuals who obtain consent on freedoms accorded to investors countries have a higher threshold the basis that they are acquiring in New Zealand. and Australia has a special a home to live in and have made arrangement under the CER a commitment to reside in • Not all overseas investments into Investment Protocol) New Zealand, and New Zealand require consent, or notification. Like most other • an interest in sensitive land, or • investors who can demonstrate countries, however, New Zealand through obtaining OIO consent fishing quota. does require overseas persons • that they will be developing the to obtain consent for, or to notify land and adding to New Zealand’s certain types of investments. housing supply, or using the land ALERT for a non-residential use or for a The definition of sensitive land is residential use that is incidental to very detailed and requires careful the investor’s core business. checking and analysis from qualified advisers. In particular, land may be “sensitive” if it adjoins certain Exemptions are available for types of land, or is “associated” with Australians and Singaporeans under other land already controlled by an New Zealand’s treaty obligations with overseas person. these jurisdictions.

Tessa Baker – Partner T: +64 9 357 9502 M: +64 27 622 3161 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 4 DecemberJuly 2021 2019 HOME 4 Consent criteria Sensitive land To obtain consent, the overseas investor will need to demonstrate that the purchase will bring benefits additional to those which would accrue from continued New Zealand ownership. These benefits are assessed against a variety In general, all applicants (including persons of economic, social and conservation factors. All residential land, including “lifestyle,” is included in the sensitive with control of the applicant if the applicant land category. is an entity) are required to meet a bright line investor test comprising a closed list of Rural land For non-urban land larger than five hectares, the overseas investor will need to show that the benefits to New Zealand character and capability factors. arising from the investment are “substantial and identifiable”, with particular focus on economic benefits including employment, new technology and business skills, increased exports and processing of primary products and local The character factors include: oversight and participation. The type and level of benefits required mean it is difficult for an overseas investor to obtain consent to buy rural land without substantial enhancements proposed. • convictions resulting in imprisonment • corporate fines both in New Zealand Special land Special land includes the foreshore, seabed, riverbed or lakebed that forms part of sensitive land. and overseas, and Special land transfers are subject to stricter conditions and the part of the sensitive land that is special land must be • being ineligible to come to offered to the New Zealand Government as a part of the OIO consent application process. New Zealand. Farm land Farm land must be offered on the open market before a sale to an overseas person can be completed. The capability factors include: Exemptions from this requirement can be obtained, but only in special circumstances and at the discretion of the • prohibitions on being a director relevant Minister. promotor, or manager of a company Residential For transactions involving residential land (which is not otherwise sensitive), the overseas investor will need either to • penalties for tax avoidance or land satisfy the benefit to New Zealand criteria or one of four alternative tests: a commitment to reside in New Zealand, evasion, and increased housing supply, non-residential use or incidental residential use. • unpaid tax of NZ$5 million or more. Leases Leasehold interests in sensitive land for a remaining term of more than three years including renewals (increasing to 10 A national interest assessment may years from 5 July 2021) will require consent. be applied to transactions involving strategically important businesses, an Forest land Overseas investors wanting to buy forest land – being land over five hectares devoted principally to forestry – will need overseas government investor or an to satisfy either the benefit to New Zealand criteria or one of two alternative streamlined tests: the special forestry test area of specific national interest. This or the modified benefits test, both of which also involve replanting after harvest. The OIA also covers the acquisition of assessment, which is intended to be forestry rights over 1,000 hectares per annum. used rarely, will make sure that overseas investments in sensitive and high-risk Strategically Transactions involving a strategically important business (such as military or dual-use technology, ports or airports, assets are not contrary to important electricity, water, telecommunications, and financial market infrastructure) are subject to a national interest assessment New Zealand’s national interests. infrastructure taking into account a range of factors, the importance of which can vary depending on the investment.

Certain investments have additional criteria that must be met for consent to be granted (see the following table). We recommend you check with a qualified adviser on these requirements.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 5 Off-shore transactions We recommend that potential investors Class exemptions The Government passed amendments engage New Zealand legal counsel early to the Act aimed at making the regime Transactions occurring outside The requirements for consent do not in the investment process to assess easier to use and more facilitative of New Zealand may still require OIO apply to certain situations covered by whether consent is needed and to productive investment that supports consent if the target business has class exemptions including: ensure that there are no unnecessary New Zealand’s wellbeing. Certain interests in land or other assets in delays. An application for consent can legislative changes will commence on 5 New Zealand. OIO implications for off- transfers within 95% wholly owned require preparing a large amount of • July 2021 with the balance coming into shore transactions should be assessed groups information on the investor and the force before June 2022. early in the transaction process to plans for the investment. where there is no increase in ensure that OIO timeframes do not • ultimate overseas ownership and cause unnecessary delays. Target processing times can be found at control linz.govt.nz. Consent application process • acquisition of redeemable preference shares The consent application process is administered by the OIO and governed ALERT • security arrangements in the by the Overseas Investment Act 2005 Complex applications can take ordinary course of business that (the Act) and accompanying regulations. longer than the OIO targets. We secure payment or performance of can advise you of likely application an obligation, and The overall consent decision rests processing times when preparing underwriting of an issue of securities with the relevant Ministers. The OIO specific applications. • in the ordinary course of business, assesses the consent applications, provided that the position is held and makes recommendations to the for less than six months and voting Ministers. For certain applications the Consent conditions rights are not exercised. OIO itself makes consent decisions Consent will be granted subject to under delegated authority from the various conditions with which the Ministers. National interest assessments applicant must comply and against are made by the Minister of Finance and which applicants must report. Often are not delegated. the conditions will reflect the nature of the benefits claimed to support the transaction in the consent application. Standard conditions include a requirement to dispose of the interest if consent conditions are not met.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 6 DecemberJuly 2021 2019 HOME 6 Key points Establishing a ALERT Establishing We can assist and put you in touch • Overseas persons can own New Zealand with providers of professional assets and operate businesses in subsidiary company director and registered office a business in New Zealand. services in New Zealand. A New Zealand company is a separate • It is relatively easy and free of New Zealand restrictions to set up a company in legal entity responsible for its own New Zealand. assets and liabilities. There is no Establishing a limited restriction on the size of a company’s partnership • Overseas companies and limited share capital. There are no residency partnerships which intend to carry restrictions on shareholders. The rules governing limited partnerships in on business in New Zealand need New Zealand are similar to those applying to register with the New Zealand Key points to note in other jurisdictions, including Delaware, Companies Office. • Every New Zealand company Australia and the Channel Islands. The distinctive feature of the limited Overseas entities will need to requires at least one New Zealand • partnership model is that it is a separate obtain a New Zealand tax number resident director or one Australian legal entity but provides the protections and, depending on the volume of resident director who is also a of limited liability to its members. business, may be required to register director of an Australian company. for the Goods and Services Tax. As long as this requirement is fulfilled, a New Zealand company A limited partnership must have at may have any number of least one general partner and one ALERT overseas directors. limited partner, who cannot be the Unlike other countries, the same person. A general partner may Companies Register maintained • There is no requirement for a company be an overseas company registered in by the New Zealand Companies to have a company secretary. New Zealand with at least one director Office is publicly available, • The Companies Office may require who lives in New Zealand or who lives including information regarding a certified proof of identity (e.g. in Australia and is a director of an directors and shareholders, such passport) and a certified proof of Australian company. A general partner as their residential address and full is jointly and severally liable with the legal name. residential address (e.g. utilities bill) for overseas directors when limited partnership and any other registering a company. general partners for the unpaid debts and liabilities of the limited partnership. • Every New Zealand company requires a New Zealand registered A limited partner has the protection of office address/address for service. limited liability, but must not take any part in the management of the limited partnership. A limited partner can be an Tim Tubman – Partner overseas person. T: +64 9 357 9076 M: +64 27 344 2178 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 7 Entering a joint venture/ Branch, subsidiary or limited partnership?

general partnership There are advantages to each of the three options, depending on the circumstances. Joint ventures for a particular project can be carried out by a Branch Subsidiary Limited partnership company, a limited partnership or an unincorporated contractual Liability Because the branch is legally the A special purpose subsidiary may The general partner (which may joint venture. overseas company, there is no help ring-fence liability. But in be a company) manages the sheltering of liability. practice, unless the subsidiary is business and can be liable for any A general partnership is not a separate substantial in its own right, any debts and obligations which the legal person and each partner is jointly significant commercial dealings limited partnership itself is unable and severally liable for the debts of may need to be guaranteed by the to meet. The limited partners are the partnership. Responsibilities and overseas parent. passive investors and their liability liabilities can be allocated according is limited to the amount of capital to a partnership deed, but partners they agree to contribute. do not enjoy the protection of limited The branch will generally be The subsidiary is a New Zealand Limited partners are treated as liability. For this reason, some investors Tax considered to be non-resident for tax resident and will be subject holding the assets of the limited prefer to pursue joint ventures through tax purposes, with the effect that to New Zealand tax on the partnership and personally derive a special purpose vehicle company or the overseas company will have to subsidiary’s worldwide income. the income and deductions. This limited partnership. pay any tax obligations incurred in Losses cannot be offset against enables them to distribute capital New Zealand but may also be able any income of the overseas gains among themselves tax free Establishing a new business may be to include the branch activities parent and cannot usually and to pass through tax losses subject to the Overseas Investment in the tax return filed in the home be claimed in the parent’s (although only to the extent of Act (see the Investing in New Zealand jurisdiction of the head office. home jurisdiction. that limited partner’s exposure to section for more detail). the loss).

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 8 DecemberJuly 2021 2019 HOME 8 Buying and Key points Registered title system Forms of title • All titles in New Zealand are New Zealand uses the Torrens land In New Zealand there are three main registered at Land Information registration system under which most forms of title. developing New Zealand. “Freehold” title is parcels of land have their own titles the most common. Particular care showing dimensions and location, Freehold – this is the most common real estate in needs to be taken when dealing with ownership and other interests affecting (and best) form of title available in “leasehold” or “unit title” properties. the land. The government guarantees New Zealand. the accuracy of titles, which can be • When purchasing property in searched by the public for a nominal fee. – the purchaser of a New Zealand New Zealand, it is usual to sign a Leasehold leasehold property acquires the sale and purchase agreement that Chapman Tripp provides a full title benefit of a lease of the property (as is conditional upon the purchaser searching service. opposed to the freehold). Leasehold carrying out a due diligence title is particularly prevalent within the investigation and being satisfied with The primary attraction of the Torrens Auckland waterfront area. The term and the results of that investigation. system is that dealings can be rental structure of these leases can • Overseas investors need conducted in reliance on a single title, vary significantly. Particular care needs government consent under the rather than on a succession of title to be taken when acquiring leasehold Overseas Investment Act to buy deeds. New Zealand has converted property, especially when the lease “sensitive” land (which includes almost all titles, plans and instruments reserves an annual rent that is subject farm land and residential land) into an electronic format, allowing to review under the terms of the lease. or any other property where the real-time searching and electronic consideration is over NZ$100 registration of all land title and million. See the Investing in New surveying transactions. Zealand section for more detail. Under New Zealand law, buildings and other improvements permanently attached to the land form part of the land itself and pass with ownership of the land, unless the seller and buyer agree otherwise.

Dealings with land are registered electronically against the title.

Mark Nicholson – Partner T: +64 9 357 9297 M: +64 27 305 9120 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 9 Unit Title – unit titles are similar freehold but it is not uncommon to Act 2010, with a particular focus on to provide the purchaser with a pre- to other forms of title save that find leasehold unit titles within the the management and maintenance of contract disclosure statement which they are limited to a defined part Auckland waterfront area. A purchaser common property (such as lobbies contains information on the unit title of a building or property. They are of a unit title property automatically and lifts) and the structural elements being purchased (including the amount the most common form of title for becomes a member of the “body of the building as well as common of the “levies” payable to the body apartment buildings (with each corporate”. The body corporate building services. Before entering corporate to cover the cost of the individual apartment comprising a effectively governs the building into an agreement to purchase a unit insurance of the building as well as its single unit title). Most unit titles are under the terms of the Unit Titles title property, the vendor is obliged management and maintenance).

Doing business in New Zealand A GUIDE FOR INVESTORS 10 July 2021 HOME 10 Contracts for sale and Due diligence • any relevant records held by the Seismic rating of purchase of land council regarding the property commercial buildings Due diligence is a fundamental (for example the existence of any component of the process of acquiring To be enforceable under New Zealand contamination or geotechnical As a result of the Christchurch property in New Zealand. Depending law, a contract for the sale and issues or whether the building earthquakes of 2010 and 2011, on the nature of the property being purchase of land must be in writing has been identified as purchasers of commercial buildings will acquired, due diligence commonly and signed by the parties involved or now usually include the seismic rating entails engaging a lawyer to review: “earthquake prone”), and their authorised agents. Once signed, of those buildings as part of their due an agreement for sale and purchase • any rates arrears. diligence investigation. • the title to the property and (in the becomes legally binding on all parties. In addition, you will need: case of commercial property) the All new buildings in New Zealand terms of any leases Sale and purchase agreements can be • a registered valuer to undertake a are required to be constructed to made subject to conditions which are • council records for the property in valuation of the property, and 100% of the current building code designed to protect either the seller the form of a “LIM” report to identify (often referred to as “New Building a building inspector/engineer or the buyer. Common conditions are the following types of issues: • Standards” or “NBS”). However, older to review the condition of the the buyer raising finance and the buyer buildings are unlikely to have been • any enforcement action being building and identify any defects or being satisfied with the results of the constructed to 100% of NBS, either maintenance issues (see also the due diligence investigation (see below). taken by the council for non- because of the lower building standards comments below about the “seismic compliance with statutory or applying at the time the building was rating” of commercial buildings). You should always obtain legal advice regulatory requirements constructed or because of poor design before entering into a sale and purchase or workmanship. • any outstanding code compliance agreement. However, particular care certificates in respect of any needs to be taken before entering into an agreement to purchase: building work undertaken at the ALERT property (see section below on An older building with a seismic • a commercial property (which, building works) rating of less than 34% of NBS depending on size and value, may is classified as “earthquake the existence of a building be subject to fairly significant legal • prone” and will be subject to negotiation), or warrant of fitness which is statutory requirements for seismic required for most buildings other strengthening works. Particular care • a residential property that is to be than stand-alone houses (see needs to be taken with heritage developed by the vendor (commonly buildings and buildings constructed section below on building works) referred to as buying property “off before 1976, which are more likely to the plans”). be earthquake prone.

Where a real estate agent is engaged by a seller to effect a sale, commission is payable by the seller. There is no stamp duty.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 11 Typically, most investors in commercial Residential property Residential Land Withholding Tax Resource property in New Zealand look for a (RLWT) applies where the seller is an seismic rating of at least 67% of NBS. – tax considerations offshore person and the residential land Management Act A rating of less than 67% can have an is sold within the relevant “bright-line” impact on the value of the property Gains from the sale of residential period. RLWT also applies to sales by The Resource Management Act 1991 is and also the ability to attract or retain properties purchased: New Zealand entities that are ultimately New Zealand’s principal statute relating tenants. Most major corporates in more than 25% owned or controlled by to the use of land, water, minerals, on or after 27 March 2021 and held for New Zealand will refuse to lease • offshore persons. (For more detail, refer the coast, air and physical resources. property in New Zealand if it has a less than 10 years, or to the section on New Zealand’s cross- The Act has major implications for seismic rating of less than 67%. • between 29 March 2018 and 26 March border tax regime.) all property developments, be they commercial, industrial or residential 2021 and held for less than five years There are two main types of report Residents must provide an IRD number in nature, and for infrastructure and issued by engineers to assess the are taxed at the owner’s standard as part of the usual Land Information utilities. A new development may seismic rating of a building: income tax rate under the “bright-line New Zealand transfer process. require a number of consents under the test”. The Government has announced Non-residents must also provide a Act before it can go ahead. that “new build” residential properties • an “ISA” (or “Initial Seismic New Zealand IRD number as well as a acquired on or after 27 March 2021 will Assessment”), a very high level home jurisdiction tax number together Controls on property development be subject to a shorter five year “bright- desktop study that is not always line” period, however legislation to with another form of identification – are administered by local government accurate and should be treated with achieve this has not yet been introduced such as a passport. In order to obtain authorities and are expressed through a caution, and (although it is expected to apply an IRD number, a non-resident will range of publicly notified plans. These retrospectively once enacted). need a fully functional New Zealand include regional plans, district plans, • a “DSA” (or “Detailed Seismic bank account or confirmation from and some national level plans. Plans Assessment”) which is usually more Exemptions will apply if the property is: a New Zealand reporting entity that set out rules for activities depending accurate but will generally cost customer due diligence has been on the nature, scale and location – for more than an ISA. However, care • the seller’s main home completed in accordance with most developments above a certain New Zealand anti-money laundering size this includes the requirement to still needs to be taken to review the • inherited from a deceased estate report to identify any limitations (AML) legislation. obtain resource consent. At the district sold as part of a on the scope of the investigations • level, these rules are largely based relationship breakdown. undertaken by the engineer. on the zoning of the relevant land. Parties seeking consent to proceed Gain from sale of a property held for with a development must follow the If the engineer’s report was obtained longer than five years or 10 years may procedures set out in the relevant plan. by the vendor, the purchaser should still be taxed if the Inland Revenue consider requiring either that the Department (IRD) considers that the This may involve public participation in engineer confirm in writing that the seller acquired the property for a purpose the resource consent process, through purchaser may rely on the report or or intention of resale, or if one or more notification of the consent application. that the report be re-addressed to of the specific land taxation provisions the purchaser. applies (for example, if the seller carried on, or was associated with someone who carried on, a business of land dealing, land development or building at the time of acquiring the property and sells that property within 10 years).

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 12 DecemberJuly 2021 2019 HOME 12 Privately owned land may also Following completion of any work Allied to the Building Act is the Building Māori land claims be designated in the applicable pursuant to a building consent, a code Code. This sets criteria to ensure district plan as being required by compliance certificate (or “CCC”) buildings are safe, sanitary, have Land claims by Māori, the indigenous the government or other competent should be obtained. When purchasing adequate means of escape and, in the people of New Zealand, are governed designating authority for a public work a building in New Zealand, a key item case of public buildings, have access by the Treaty of Waitangi Act 1975. (including compulsory acquisition that should be checked during the due and facilities for disabled persons. Under the Act, grievances are heard if necessary). The current market diligence investigation is whether there Existing buildings, which are being by the Waitangi Tribunal which can value of the land would be paid as are any outstanding code compliance altered, may require upgrading in the then make recommendations to the compensation. certificates for building work carried course of the alterations in order to government regarding the resolution of out at the property. This can be verified comply with these criteria as nearly those grievances. For more detail on the Resource by engaging a lawyer to review an up to as is reasonably practicable. Buildings Management Act 1991, refer to date “LIM” report for the property. considered earthquake prone may also Recommendations for the return of the Environment and resource be required to be upgraded. land to Māori are generally applicable management law section. Most types of property (other than only in respect to land owned by stand-alone houses) are also required The Act imposes restrictions upon the government or State-Owned to hold a building warrant of fitness occupation of a building where public Enterprises. Privately owned land is not Building works (or “BWOF”) that is issued annually areas of that building are subject subject to return to Māori ownership confirming that certain building to building works for which a code unless the title to the land has been The Building Act 2004 is designed to systems and services (mostly related compliance certificate has not yet specifically endorsed to that effect regulate and control building work and to life safety, such as sprinklers, lifts been issued. (and, even then, current policy is not to the use of buildings. Every new building and fire alarms) comply with certain exercise that right). If it was exercised, and most substantial alterations or Building Act criteria. The existence the current market value would be paid. additions to existing buildings will of a BWOF should be checked during require a building consent. Multiple-use the due diligence investigation by For more information on Māori approvals are available for group home reviewing an up to date “LIM” report for rights under the Treaty, refer to our builders who build homes throughout the property. New Zealand using the same or New Zealand Māori and the Treaty of similar plans. Waitangi section.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 13 Key points The Resource Applications for resource consent are generally made to the relevant local Environment authority. Depending on the type • The Resource Management Act 1991 Management Act of activity, the application may be (RMA) is the primary instrument of The RMA regulates all uses of land, heard without public notification, on a and resource environmental regulation in New water and air, out to the edge of the 12 publicly notified basis, or with limited Zealand. It is however currently nautical mile coastal limit. It is largely notification to affected parties only. subject to extensive reform and management administered by local government is expected to be replaced in the through resource consents granted, or near future. Applicants must provide a law in withheld, under statutory and publicly comprehensive assessment of the notified district and regional plans, and environmental impact of the proposal • The Exclusive Economic Zone and some national level documents. or use. Rights of appeal can generally Continental Shelf (Environmental be exercised by the applicant, or by New Zealand Effects) Act extends a variant of the District plans control the use of land. anyone who has made a submission RMA into the sea and seabed 12 to Regional plans control the use of water, on the application to the Environment 200 nautical miles offshore from coastal matters and the discharge Court. (Special processes apply in New Zealand. of contaminants. some cases, such as for nationally significant projects). • New Zealand’s climate change These plans classify activities as: response is delivered through an The RMA has a range of penalty and Emissions Trading Scheme. • permitted (not requiring enforcement provisions. Directors 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 provide will often be subject to specific national direction through National conditions designed to mitigate any Policy Statements, National Planning adverse environmental effects), or Standards and National Environmental • prohibited (will not be consented). Standards.

Catherine Somerville-Frost – Partner T: +64 9 358 9813 M: +64 27 486 3309 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 14 DecemberJuly 2021 2019 HOME 14 Under the RMA, polluters who The Exclusive The Emissions The ETS currently covers forestry, contaminate land can be liable. But electricity production, industrial owners or occupiers of contaminated Economic Zone and Trading Scheme processes, liquid fossil fuels, synthetic land can also face enforcement action gases and waste. Although it was for that contamination (even if it is Continental Shelf The Emissions Trading Scheme designed as an “all gases, all sectors” historic contamination caused by a (ETS) is the key delivery mechanism scheme, agriculture will not come fully The Exclusive Economic Zone and previous polluter). for New Zealand’s commitments to into the scheme until 2025. Continental Shelf (Environmental emission reduction, legislated for Effects) Act (EEZ Act) extends a variant When the RMA was enacted in through the Climate Change Response A recent series of amendments will: of the RMA to the EEZ and applies to 1991, it placed a very high value on (Zero Carbon) Amendment Act 2020. activities such as seismic surveying local decision-making and public phase out free allocations to high- and cable laying, seabed mining and • consultation. It still reflects those The Zero Carbon Act: emitting trade-exposed industries, the construction and installation of founding values but has been much beginning in 2021 and gathering oil and gas rigs. It also anticipates amended over its history and most of establishes a net zero emissions speed from 2030 possible future uses, including deep • those amendments have been designed target (allowing for forestry offsets) sea aquaculture, carbon capture and create a cost containment reserve to streamline RMA processes and by 2050 for all greenhouse gases, • storage, and marine energy generation. which establishes a price floor of to permit more central government except biogenic methane which is to NZ$20 per unit and an effective intervention with a view to speeding be brought within a range of 24% to The permitting authority is the price ceiling of NZ$50 (each to be up development. 47% below 2017 levels by 2050, and Environmental Protection Authority (EPA), increased by 2% a year to provide which must issue a decision on publicly creates an independent Climate for inflation), and A comprehensive review of the RMA • notified applications within six months of Change Commission which will is currently underway, with changes improve the auctioning system receiving the application, or within 60 days be responsible for preparing five • expected to be legislated for within the for units. of receiving a non-notified application. year emissions budgets (the first of current Parliamentary term. which will be delivered on 31 May For more information, go to: The EEZ Act identifies various factors 2021) and advising the Minister on climatechange.govt.nz/emissions- which should drive the EPA’s decision- the quantity of emissions which trading-scheme making. Several of these reflect will be permitted within each environmental or biodiversity values but budget period. they also include the economic benefit to New Zealand and the efficient use and development of New Zealand’s mineral resource.

Appeal rights are to the High Court and are limited to points of law. The maximum penalty for breach of a marine consent is NZ$10 million.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 15 Minerals regime The Government is allowing existing Evaluation criteria for oil and gas All transfers of, or other dealings with, permits for oil and gas exploration to exploration under the allocation a permit interest require the consent of run their course but will not issue any system must meet health, safety New Zealand Petroleum & Minerals. Access and rights to prospect, explore new offshore permits and will issue new and environmental requirements and mine New Zealand’s extensive onshore permits only in the Taranaki and the applicants must engage with petroleum and mineral estate are For more information, go to: region. The National Party has promised indigenous communities. Permits can governed by the Crown Minerals Act nzpam.govt.nz that it will reverse this ban when next be granted for up to 15 years and give 1991 and by the Minerals Programme in office. the holder exclusive rights to explore and the Minerals Programme for in the designated area. An exploration Petroleum issued under it. All petroleum, gold, silver and permit does not automatically confer uranium deposits (including under mining rights. These must be applied Acquisition of permits is through an the sea) are the property of the for separately. annual Block Offer process, although Crown (Government). No person this is currently tightly restricted. may prospect, explore for, or mine, Return to the government is through government-owned minerals without an a royalty regime, although there is appropriate permit. provision in the Act for the government also to participate in any given permit The annual Block Offer process is and thus derive a fair financial return limited to onshore Taranaki. through that avenue. The current policy is not to exercise this right.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 16 DecemberJuly 2021 2019 HOME 16 Key points • These settlements have helped to To address the ambiguities between finance the creation of iwi corporations the two versions, the courts of New New Zealand and the “Māori economy”, which is Zealand do not seek to enforce the • Māori are the indigenous people of valued at NZ$50 billion. actual wording of the Treaty. Instead, in New Zealand. a landmark case in 1987 (New Zealand Māori and • Iwi corporations often look to • New Zealand has no written Māori Council v Attorney-General), maximise returns from settlement constitution, but the Treaty of the Court of Appeal established the assets through joint venture (JV) the Treaty Waitangi 1840 (the Treaty) is a principles of the Treaty of Waitangi: arrangements with overseas investors. part of the foundational law of the Treaty imposes a duty on both the of Waitangi the country, as recognised in a Crown and Māori to act in the spirit of number of New Zealand statutes, The Treaty of Waitangi partnership envisaged by the original court decisions and common signatories, and both Treaty partners law principles. The Treaty of Waitangi was signed on must act reasonably, honestly and in the utmost good faith. • The Treaty is, in essence, an 6 February 1840 by representatives of agreement between the British the British Crown and some, but not all, Settlement of historical claims for Crown and Māori chiefs, and Māori iwi. Waitangi Day, observed on 6 breaches of the Treaty must be establishes a partnership based on February each year, is a public holiday negotiated with the government of mutual duties to act reasonably, to honour the signing of the Treaty. the day. Some iwi and hapū groups honestly and in the utmost choose to go straight into negotiation good faith. The Treaty has always been the subject of debate as there are two versions – with the Crown. Others choose to • The British Crown did not honour an English version and a Māori version first go through a Waitangi Tribunal the Treaty, with the result that – and there are some significant hearing process. Māori collectives (called iwi or differences between them. In particular, hapū) have legitimate grievances. there are interpretation issues around The Waitangi Tribunal conducts A political process was developed precisely what is meant by three comprehensive inquiries into Māori in the 1990s to negotiate and settle key Māori concepts – kāwanatanga claims and can make non-binding these grievances. The settlement (governorship), rangatiratanga recommendations to the government. packages include cultural and (chieftainship) and taonga (treasures). The Waitangi Tribunal can make binding commercial redress. The Treaty also guaranteed to Māori recommendations in very limited “exclusive and undisturbed possession circumstances, relating to Crown owned of their lands, forests, fisheries and forest land and certain lands previously other properties”. owned by State-Owned Enterprises.

Te Aopare Dewes – Partner T: +64 9 358 9839 M: +64 27 209 0810 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 17 Reports produced by the Tribunal Māori land claims Treaty settlement process The Māori economy are then used by claimants as a basis for their direct negotiations with Land claims by Māori are governed Iwi receive settlement of their historic The Māori economy is broadly defined the Crown for settlement of their by the Treaty of Waitangi Act 1975 grievances with the Crown in the as those privately or collectively owned historical Treaty breach claims. The and are heard by the Waitangi form of cultural and commercial businesses that have links to Māori Tribunal also has jurisdiction to inquire Tribunal which can then make non- redress. Commercial redress is usually ancestors. Its financial value has been into ‘contemporary’ breaches of binding recommendations to the determined by the negotiation of a assessed at NZ$68.7 billion comprising: the Treaty. government regarding the resolution quantum amount, followed by iwi or NZ$47.7 billion Māori-owned businesses of those grievances. hapū purchasing Crown lands with and NZ$21 billion in Māori trusts, The Treaty is not enforceable as that money. incorporations and other entities. an international treaty or a matter Generally, the Tribunal cannot of statute law, but its principles recommend the return of privately It may also include valuable rights Māori control 50% of New Zealand’s became much more relevant in the owned land to Māori, and cannot of first refusal for between 50 to fishing quota, and own around 40% of contemporary context in the 1980s, recommend the Crown to acquire 170 years (in some cases, longer) forestry. Some of these holdings were in part because the government privately-owned land. However, there over surplus Crown lands within the established through the ‘Sealords legislated in 1985 to enable the are some exceptions to this. traditional area of the iwi or hapū. Deal’ in 1992 (the Treaty of Waitangi Tribunal to investigate breaches dating settlement relating to Māori fishing back to 1840 and after the insertion Privately owned land which has a Some iwi and hapū have used rights) and the ‘Treelords Deal’ in 2007 into the State Owned Enterprises “section 27B” memorial noted on the settlement monies to create large, (the Treaty of Waitangi settlement Act 1986 of a provision preventing title is land that was previously owned asset rich Māori corporates, the under which the Kaingaroa Forest was the Crown from acting in a manner by a State-Owned Enterprise. This three largest of which are now valued transferred from the Crown to central inconsistent with the Treaty. memorial notes that the Tribunal can at over NZ$1 billion each. These North Island iwi). Māori also own 30% make a binding recommendation to the are now significant players in the of lamb, sheep and beef production Many pieces of legislation also create Crown that it purchase the land and New Zealand economy. and 10% of dairy and kiwifruit a statutory requirement to consult return it to Māori ownership as a way production. Māori, including the Local Government of settling a claim, a process known Act 2002 and the Resource as resumption. Iwi and hapū corporations have Management Act 1991. sought to maximise the returns If the Waitangi Tribunal did make such from their asset base through joint a recommendation, the owner would ventures and other partnerships be compensated by the government with investors who can bring capital, of the day. To date, the Waitangi value-added processing, employment Tribunal has only ever made one binding opportunities, and market access. recommendation for resumption of land China has been a particular focus for and in that case, the Māori claimants these activities. and the Crown negotiated a settlement.

Doing business in New Zealand A GUIDE FOR INVESTORS 18 July 2021 HOME 18 Key points Individuals are regarded as resident Income tax is imposed at 28% on for income tax purposes if they have companies and unit trusts (which are Taxation a permanent place of abode in New treated as companies under New • New Zealand has a broad-based Zealand or are present in New Zealand Zealand tax law). Individuals (both income and consumption tax for more than 183 days within any resident and non-resident) are taxed within system. This includes withholding 12-month period. New migrants and, in progressively at between 10.5% and taxes on many cross border certain cases, returning New Zealanders 39%, with the 39% rate cutting in at payments and a robust general anti- New Zealand who have not been resident for tax taxable income over NZ$180,000. As avoidance rule. purposes in New Zealand for at least noted above, non-residents are taxed • The primary revenue sources ten years, can qualify for temporary only on their New Zealand-sourced are: income/company tax, a transitional residence status. A income. consumption tax on goods transitional resident is exempt from and services (GST) and local New Zealand income tax on their For individuals, assessable income authority rates. foreign-sourced income other than includes (among other items) salary income from employment or the and wages, bonuses, other employment • Capital gains tax, stamp duty, gift supply of services for a period of four benefits or remuneration, partnership duty and death duties are not years after they meet the test for New income and investment income. payable in New Zealand. Zealand tax residency. For salary and wage earners, tax is deducted at source by the employer Income tax A company is regarded as resident in through the Pay As You Earn (PAYE) New Zealand if it: system. The amount of tax deducted For individuals and companies defined will depend on the gross salary or as “resident” in New Zealand, income • is incorporated in New Zealand wage paid to the employee. Non-cash tax is generally imposed on worldwide benefits provided to employees are • has its head office in New Zealand income. Non-resident individuals subject to Fringe Benefit Tax (FBT) and companies are taxed only on • has its “centre of management” in which is payable by the employer. New Zealand-sourced income, and New Zealand, or their tax liability may be reduced by is controlled by its directors in the provisions of an applicable Double • New Zealand. Tax Agreement.

Bevan Miles – Partner T: +64 9 357 8986 M: +64 21 240 7387 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 19 For companies, net taxable income Exemptions will apply if the property is: Residents must provide an IRD number Permitted major changes are, more or generally corresponds with accounting as part of the usual Land Information less, changes: profit or loss. However, adjustments are • the seller’s main home New Zealand transfer process. commonly required in relation to: Non-residents must also provide a made to increase the efficiency of a • inherited from a deceased estate • New Zealand IRD number as well as a business activity • the timing of income and • sold as part of a relationship home jurisdiction tax number together expenditure recognition break down. with another form of identification – • made to keep up to date with such as a passport. In order to obtain advances in technology • bad debts The Government has announced that an IRD number, a non-resident will • capital receipts and depreciation “new build” residential properties need a fully functional New Zealand • caused by an increase in the scale rates, and acquired on or after 27 March 2021 bank account or confirmation from of a business activity, and will be subject to a shorter five year a New Zealand reporting entity that • various provisions and reserves. • caused by a change in the type of “bright-line” period, however legislation customer due diligence has been products or services produced or to achieve this has not yet been completed in accordance with New Zealand does not currently have a introduced (although it is expected to New Zealand anti-money laundering provided. broad based capital gains tax. In certain apply retrospectively once enacted). (AML) legislation. circumstances, however, capital gains Specific anti avoidance rules (described are taxed. In particular, the proceeds as “anti-injection” rules) target schemes Gain from sale of a property held for Treatment of tax losses from the sale of real or personal involving the acquisition of a business longer than five years or 10 years may property (including shares) may be If a resident company or a New Zealand with losses (relying on the business still be taxed if the Inland Revenue subject to income tax (for example, branch of a non-resident company continuity test to carry forward those Department (IRD) considers that the where the dominant purpose of the incurs a tax loss, that loss can generally losses) and diverting income or expenses seller acquired the property for a purpose be carried forward indefinitely to offset initial purchase was to resell the asset between that company and its associates. or intention of resale, or if one or more future New Zealand net income and at a profit). Another specific anti-avoidance rule of the specific land taxation provisions shared between group companies, prevents a business from changing its applies (for example, if the seller carried provided a certain level of shareholder activities before a change in ownership Special provisions apply to residential on, or was associated with someone who continuity (or in the case of group for the purpose of meeting the business properties other than the person’s companies, common ownership) is carried on, a business of land dealing, continuity test. main home. maintained, or the business continuity land development or building at the time test is met. of acquiring the property and sells that Individuals and trusts can also carry Gains from the sale of residential property within 10 years). forward tax losses, but these losses properties purchased: The business continuity test came into force on 1 April 2020 with retrospective cannot be shared with other entities. Residential Land Withholding Tax effect. It allows a company to carry There are also rules that apply to “ring- • on or after 27 March 2021 and held (RLWT) applies where the seller is an forward losses arising from the 2013-14 fence” losses from residential property, for less than 10 years, or offshore person and the residential land and subsequent income years following which will only be available to offset is sold within the relevant “bright-line” an ownership continuity breach, future income from residential property between 29 March 2018 and 26 • period. RLWT also applies to sales by provided there has been no major (including a taxable gain on sale). The March 2021 and held for less than New Zealand entities that are ultimately change or cessation in the nature of the rule is designed to prevent property five years more than 25% owned or controlled by business activities carried on by the investors from using excess deductions company during the relevant period, offshore persons. (For more detail, refer to reduce tax on other income. are taxed at the owner’s standard unless the change is a permitted major to the section on New Zealand’s cross- income tax rate under the“bright-line change. test”. border tax regime.)

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 20 DecemberJuly 2021 2019 HOME 20 Taxation of dividends paid by Portfolio Investments Entities (PIEs) Goods and Services Foreign suppliers of goods valued resident companies to residents at NZ$1,000 or less are required Investment entities which are tax GST to register for New Zealand GST if Dividends paid by resident companies resident in New Zealand can take Tax ( ) total sales to New Zealand residents to resident shareholders are, in most advantage of New Zealand’s PIE tax GST is a value-added tax charged at (excluding GST-registered businesses) instances, taxable to the shareholder. regime. Broadly speaking, to qualify 15% on the supply of most goods and exceeds the NZ$60,000 threshold. However, dividends paid between as a PIE, they must be widely held (or services in New Zealand. Electronic marketplaces are required New Zealand resident companies that owned by widely held vehicles) with no to register for GST (rather than the are part of the same wholly-owned investor holding more than 20% of any New Zealand suppliers of goods and actual supplier) if the applicable goods group are generally exempt (subject to investor class, and the PIE not holding services are required to register for are supplied through the marketplace certain other requirements). more than 20% of any company or unit GST if they carry on a taxable activity to New Zealand customers. trust it invests into (subject to some through which they will make taxable To avoid the double payment of exceptions). supplies of more than NZ$60,000 per Certain supplies of goods and services tax on the same income (i.e. by the year. A person carrying on a taxable can be either exempt from GST (e.g. company and the shareholder when the A PIE is exempt from tax on gains from activity can voluntarily register for GST financial services) or zero-rated company’s income is distributed as a the sale of shares in New Zealand resident even if under this NZ$60,000 threshold. (e.g. certain “exported” services and dividend), imputation credits may be companies, and in Australian companies supplies wholly or partly consisting attached to dividends paid by resident that are listed on certain approved indices Foreign suppliers may also be required of land). companies (to both residents and non- of the Australian stock exchange. to register for GST if they make residents). Imputation credits received supplies of services to New Zealand by resident shareholders (companies PIEs are not taxed like companies. residents (excluding GST-registered Local government rates and individuals) are offset against any Instead their income is taxed only once businesses) which exceed NZ$60,000 tax payable on their income, including – either to the PIE if the investor is an per year. Rates are the main source of tax on dividends received. individual or trustee (other than a trustee local government revenue. These of a unit trust or charitable trust) or to are calculated as a percentage A dividend paid by a resident company the investor (if the investor is a company of the value of land and/or to a resident is generally subject to a or another PIE). For individuals, the PIE capital improvements. 33% withholding tax. If the dividend is pays tax at more or less the investor’s fully imputed (i.e. imputation credits marginal tax rate, with a cap of 28%. are attached at the maximum rate) only a residual 5% withholding tax will Non-resident investors in certain PIEs be imposed (i.e. the 33% tax liability is bear no New Zealand tax on foreign- reduced to 5% by the 28% tax paid by sourced income. the company).

From 1 April 2021, individuals who pay tax at the top 39% marginal tax rate will be required to personally account for an additional 6% tax on fully imputed dividends (this tax will not be collected through the withholding tax system).

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 21 Key points Taxation of overseas FIF New Zealand’s The New Zealand resident shareholder • New Zealand’s cross border tax investments by will be taxed each income year on regime seeks to ensure that tax New Zealand residents income attributed from a FIF, calculated cross-border on income which is taxable in using one of five calculation methods. New Zealand is paid in New Zealand The taxation of equity investments These methods are: tax regime while avoiding situations where by New Zealand residents in income is subject to double taxation. non-New Zealand companies is • fair dividend rate method governed by the Controlled Foreign • The regime is orthodox in • cost method international terms. Company (CFC) and Foreign Investment Fund (FIF) regimes. • comparative value method • New Zealand is party to 40 tax treaties deemed rate of return, and or double tax agreements (DTAs). Subject to certain exceptions, a • New Zealand resident investor is taxed • attributable FIF income method. DTAs on income attributed from a CFC or FIF, even though that income may Income from FIFs is generally calculated not be received by the New Zealand either using the fair dividend rate New Zealand has entered into 40 DTAs resident investor. method or the comparative value to reduce the incidence of double method. The fair dividend rate method taxation and to provide more certainty CFC taxes the shareholder each income for taxpayers operating in more than one year on deemed income of 5% of the jurisdiction. New Zealand is a signatory to Subject to a number of exceptions, value of the investment at the start the Multilateral Convention to Implement the New Zealand investor will be taxed of the year. The comparative value Tax Treaty Related Measures to Prevent each income year on its proportionate method taxes appreciation during BEPS (the MLI) which modifies the terms attributed share of all net passive the year plus distributions. There are of many New Zealand DTAs (with varied income of the CFC in that year. Net exemptions from both the CFC and impacts, depending on the DTA). passive CFC income broadly comprises FIF regimes for investment in certain rent, royalties, certain income related to Australian companies. For the full list of DTAs, refer ht tp:// telecommunications services, income taxpolicy.ird.govt.nz/tax-treaties. from offshore insurance businesses, life insurance policies, disposals of revenue Foreign tax credits are generally account property, base company available to New Zealand residents for services income, certain dividends foreign income tax on income derived and interest, less related expenses. from countries or territories outside Attributed CFC income does not New Zealand. The availability and include “active” income. No attribution quantum of the foreign tax credit is of passive income is required if the subject to certain limitations, but does CFC’s passive income is less than 5% of David Patterson – Partner not depend on New Zealand having its total income. T: +64 4 498 6330 entered into a DTA with the particular M: +64 27 610 2031 E: [email protected] country or territory concerned.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 22 DecemberJuly 2021 2019 HOME 22 Taxation of payments to non-residents In the case of interest paid to non- In respect of interest payments made associated persons, dividends, and by an approved New Zealand borrower certain royalty payments, NRWT is (Approved Issuer) to a non-associated Payments of dividends, interest and royalties to individuals or companies not generally a final tax for New Zealand non-resident lender, the NRWT rate resident in New Zealand are generally subject to non-resident withholding tax tax purposes. can be reduced to 0%, provided certain (NRWT). The rate of NRWT imposed depends upon the type of payment and conditions and registration formalities whether a double tax agreement is in place: The Foreign Investor Tax Credit (FITC) are satisfied. Approved Issuers must regime supplements the NRWT regime. generally pay a levy (Approved Issuer It effectively eliminates the monetary Levy or AIL) equivalent to 2% of the effect of NRWT on imputed dividends interest payment. ​ Double tax agreement Other countries​ paid to a non-resident shareholder countries​ who holds a direct voting interest in a Interest paid on certain qualifying New Zealand company of less than 10% widely held bonds may be eligible for Dividends​* 0-15%​ 0-30% where the post-treaty tax rate (the rate a 0% rate of NRWT without the payer after taking into account any applicable having to pay AIL. Interest​** 10-15%​ 15%*** DTA) for the initial dividend is 15% or more. Withholding payments are deducted Royalties​ 5-15%​ 15%​ at the rate of 15% from non-resident The FITC regime achieves this contractors for certain work or * A 0% rate of NRWT applies to fully imputed dividends paid to a non-resident shareholder holding a by providing a tax credit to the services performed in New Zealand 10% or more direct voting interest in a New Zealand company or holding less than 10% but whose post-treaty rate is less than 15%. A 0% rate of NRWT also applies to a fully imputed non-cash New Zealand resident company, which (this rate increases to 20% where the dividend. To the extent the dividend is not fully imputed, NRWT will be required to be withheld at 30% the resident company must use to fund non-resident contractor is a company (reduced to 15% for countries New Zealand has a double tax agreement with; and to lower rates under an additional “supplementary dividend” and does not provide a prescribed some treaties for substantial shareholdings). to the non-resident (which is equal to withholding declaration to the payer ** In some cases, NRWT applies at the rate of 0%. See discussion below. the NRWT payable where the dividend prior to the payment being made). An ***Where interest is paid to a non-resident and a resident (jointly) the applicable rate of NRWT will be is fully imputed). This ensures that the exemption certificate removing the higher than 15%. non-resident shareholder is in a no less need for the withholding deduction beneficial position than a New Zealand can be granted by the IRD in certain resident shareholder receiving the circumstances. This is not considered same dividend. a minimum or final tax. It is credited against any final income tax liability the non-resident contractor may have in New Zealand, and is refundable to the extent of any excess.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 23 Residential Land Transfer pricing and Import duties OECD BEPS Project

Withholding Tax thin capitalisation Import licensing, once a common New Zealand has followed many of the means of sheltering New Zealand recommendations resulting from the The sale of residential property in New Zealand’s transfer pricing regime producers, no longer exists in OECD’s Base Erosion and Profit Shifting New Zealand acquired after seeks to protect the New Zealand tax New Zealand, with tariffs now the (BEPS) work. This includes ratifying 27 March 2021 by offshore persons, base by ensuring that cross-border principal form of protection. the OECD multilateral instrument or by New Zealand entities ultimately transactions are priced (at least for (MLI) and changes made or proposed more than 25% owned or controlled tax purposes) on an arm’s length Over recent years, there has been to New Zealand’s DTAs and domestic by offshore persons, is subject to basis. Recently enacted rules can a steady reduction of tariff rates for tax law (including rules dealing with Residential Land Withholding Tax require adjustments to credit ratings goods imported into New Zealand. transfer pricing, thin capitalisation, (RLWT) if sold within 10 years of when determining pricing of related Tariff rates vary from item to item and permanent establishments and hybrid acquisition, or within five years of party lending. depend upon the country of origin, instruments/entities). acquisition where the residential with preferential rates being applied to property was acquired between New Zealand also has thin capitalisation Australia, Canada, “least-developed The OECD and the Government have 29 March 2018 and 26 March 2021. rules which, broadly speaking; disallow countries”, “less-developed countries” sought public comment on a number certain interest deductions for a and Pacific Forum countries. Items of alternative proposals to address RLWT is generally withheld by the foreign owned New Zealand group (if that are outside the scope of local the growing challenges of taxing the seller’s conveyancing agent on the their debt to asset ratio exceeds 60%) manufacturing are generally duty free, digital economy. In particular, work is lower of 39% of the seller’s gain (28% or for New Zealand residents with or may qualify for a duty concession. underway seeking global consensus on where the seller is a company) or 10% an income interest in a CFC or who fundamental changes to profit allocation of the total purchase price. From 1 April control a resident company with such Where New Zealand is party to a free and nexus rules to expand taxing rights 2021, RLWT will be withheld on the an interest (if their debt to asset ratio trade agreement (FTA), the FTA will to jurisdictions where digital services lower of 39% of the seller’s gain (28% exceeds 75%). address in detail the tariffs applicable are consumed. where the seller is a company) or 10% of between the two countries. the total purchase price. The Government is closely watching GST is also charged on any goods that these OECD developments and has RLWT is not a final tax – the seller are imported into New Zealand. An signalled its intention to implement a is required to file a New Zealand input tax credit can be claimed for this unilateral digital services tax (DST) if tax return and can claim a credit for GST (meaning no net cost arises) where progress on a multilateral solution is not RLWT withheld against tax payable. the importer is GST-registered and is forthcoming. Given the Government’s Certificates of exemption are available acquiring the imported goods for the comprehensive implementation of the for developers, dealers and builders purpose of making supplies which are OECD’s BEPS recommendations and and for sellers who have used the subject to GST. general public sentiment, we expect property as their main home. (Refer changes to New Zealand’s rules are on also to the section on Buying and the horizon. developing real estate in New Zealand.)

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 24 DecemberJuly 2021 2019 HOME 24 Key points Contract and Commercial • the courts may grant relief, Law Act 2017 including to cancel the contract, Contract vary the contract or make orders • New Zealand contract law is light The Contract and Commercial Law Act for compensation in limited handed, allowing contracting 2017 (CCLA) provides that: circumstances where a party can law in parties to contract on commercially establish it entered into the contract agreed terms. various terms are read into contracts • as a result of a genuine mistake for the sale of commercial goods New Zealand • Most contracts can be concluded of fact. orally. Contracts involving land, unless the parties clearly intended otherwise, including terms relating mortgages, guarantees, extended New Zealand does not have any to when title and risk will pass, and consumer warranties, credit separate laws or regulations implied guarantees of fitness for contract disclosures or employment for contracts involving foreign- purposes and merchantability agreements must be written. owned entities. • contracts with a person under the age of 18 cannot be enforced The CCLA also gives electronic Relevant laws against that person, subject to signatures the same status as paper certain specific exceptions and the signatures, provided the technology While New Zealand’s contract law court’s discretion used to produce the signature meets is primarily based on common certain statutory criteria as to reliability, law principles, various statutory a party may cancel a contract • traceability and tamper-detection. overlays apply. for breach, repudiation or pre- Powers of Attorney, wills and other contractual misrepresentations (if testamentary instruments, negotiable prescribed criteria are satisfied), Consumer protection legislation instruments and bills of lading cannot and/or recover damages. The courts If one party to a contract is a consumer, be made or signed electronically. also have the power to grant other certain consumer protections will apply types of relief under the CCLA regardless of the terms of the contract (see the Consumer Protections in • contracts which are illegal at New Zealand section for details). law or equity will be of no effect and the courts have the power Credit contracts with consumers to make a variety of orders, are subject to the Credit Contracts including amending the contract. and Consumer Finance Act 2003 Unreasonable restraints of trade (see the Consumer Protections in and penalties are examples of illegal New Zealand section). contracts at law. This is broadly consistent with other jurisdictions that share an English common law heritage, and

Kelly McFadzien – Partner T: +64 9 357 9278 M: +64 27 473 2230 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 25 The principal pieces of consumer These prohibitions apply whether the Breaching the Fair Trading Act can legislation are: activity is intentional or not. attract both civil and criminal penalties. Consumer Penalties include: • Fair Trading Act 1986 The Fair Trading Act sets information and safety standards for some types of • fines of up to NZ$200,000 per protections in Consumer Guarantees Act 1993 • products, including children’s nightwear, offence for an individual and • Credit Contracts and Consumer baby walkers and bicycles. It also NZ$600,000 per offence for a New Zealand Finance Act 2003, and deals with miscellaneous consumer company protection matters such as layby sales, Privacy Act 1993. orders for payment of the equivalent • direct (door-to-door or telephone) • revenue or commercial gain earned sales, extended warranty agreements, from certain offending Fair Trading Act 1986 auctions, and product recalls. It prohibits various types of unethical • corrective advertising orders commercial behaviour including The Fair Trading Act applies to anyone • contract rectification, and “in trade”. It prohibits: falsely applying trade marks, falsely offering prizes, bait advertising, and • compensation payments to • engaging in conduct that is likely to pyramid selling. affected parties. mislead or deceive The Fair Trading Act is enforced by • engaging in conduct that is the and gives Consumer Guarantees liable to mislead as to the consumers and businesses direct Act 1993 nature, manufacturing process, rights of action. Suppliers of goods characteristics, suitability for and services to consumers cannot The Consumer Guarantees Act: purpose, or quantity of goods or contract out of the Fair Trading Act, services and business-to-business contracts • provides consumers with certain • engaging in misleading conduct in can only exclude the Fair Trading Act in minimum guarantees in relation to relation to employment that is or specific circumstances. the quality, suitability and other may be offered to a person aspects of goods and services, and a basic guarantee as to title • making false, misleading or to goods unsubstantiated representations in respect of goods or services, and • where goods or services fail to comply with one or more of those • including or enforcing any terms in guarantees, gives consumer a standard form consumer contract remedies against suppliers and that have been declared unfair by a (in the case of goods) against the court, in accordance with the Fair original manufacturer. Trading Act. Kelly McFadzien – Partner T: +64 9 357 9278 M: +64 27 473 2230 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 26 DecemberJuly 2021 2019 HOME 26 The Act defines a consumer as a The Consumer Guarantees Act does not Privacy Act • when collecting personal person who “acquires goods or contain offence provisions. However, information, unless defined services of a kind ordinarily acquired it is an offence under s13(i) of the Fair exceptions apply, an agency must The Privacy Act 2020 governs the for personal, domestic or household Trading Act for suppliers of goods and collect the information directly collection, use, storage and disclosure use or consumption” and who does not services to attempt to contract out of from the individual, and must take of “personal information”, which hold him or herself out as acquiring the the Consumer Guarantees Act. reasonable steps to ensure the includes any kind of information about goods or service for the purpose of individual is made aware of the an identifiable individual. Personal resupplying them in trade, using them collection and provided with certain information is not limited to information in a manufacturing process or repairing Credit Contracts details about who is collecting the that is inherently private or sensitive, the goods in trade. information and for what purpose and Consumer such as health or financial information. • an agency must not collect personal This means that in many cases the Act Finance Act 2003 The Act applies to individuals, public information by unlawful means, or may apply to business-to-business agencies and private enterprises alike who by means that are unfair or intrude transactions involving consumer Providing credit at the consumer level are resident in New Zealand, present in to an unreasonable extent upon goods and services. Contracting out through credit contracts and hire New Zealand when collecting or holding personal affairs is permitted for business-to-business purchase agreements is regulated by the information, or where information is transactions, but only where certain the Credit Contracts and Consumer an agency holding personal held or collected in the course of carrying • statutory criteria are met. Finance Act (CCCFA). The CCCFA information must ensure that on business in New Zealand. sets out disclosure requirements for the information is protected by Breach of the statutory guarantees contracts, allows debtors to have reasonable security safeguards The Act does not use the same in the Act may give rise to a right to the terms of a contract changed for against loss, unauthorised access/ definition of “carrying on business” as damages, including for consequential hardship reasons and allows the courts use/modification/disclosure, and the Companies Act, and the Privacy losses sustained as a result of the to re-open and vary “oppressive” other misuse Commissioner will likely take a broad breach of guarantee, and the right to contracts. The CCCFA requires view as to whom the Act applies. The • individuals have certain rights to know cancel a contract and be refunded any repossession agents to be licensed and Act refers to all entities or persons what personal information an agency amounts paid. prohibits lenders taking security over certain “essential” goods or particular subject to the Act as “agencies”. holds about them, and to request correction of that information A consumer must first request the types of documents. The Act centres on a set of “Information supplier or manufacturer to rectify any before using personal information, Privacy Principles”, which are similar • breach of the statutory guarantees. an agency must take reasonable to those in equivalent Australian If the supplier or manufacturer does ALERT steps to ensure the information is legislation. Summarising broadly, key not satisfactorily remedy the defect, Lenders are required to exercise accurate, up to date, complete, principles include that: the consumer may bring a claim to the care, diligence and skill in dealing relevant, and not misleading Disputes Tribunal, or the High Court or with consumers and to comply with certain specific lender • an agency must not collect personal • an agency must not keep personal District Court, depending on the value responsibilities. The responsible information except for a lawful information for longer than is of the claim. lending code provides guidance on purpose, and then only where required for the purposes for which how lenders can comply with these necessary for that purpose the information may lawfully be used principles.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 27 • an agency must not use or disclose These remedies are available only where: Retail regulation Other regulations personal information except on the specific grounds defined in the • the Privacy Commissioner has Many other laws and regulations New Zealand law regulates a number of Act, for example, where the use or issued an enforcement notice affect the operation of retail other activities and goods and services disclosure is one of the purposes against an agency, the agency has businesses, including: including: gambling, prize draws and for which the information was failed to comply with that notice and promotions, which must be authorised collected, or where the agency the Privacy Commissioner enforces • smoke free legislation by the Gambling Act 2003. believes on reasonable grounds that that notice through the Human the individual has given his or her Rights Review Tribunal (in which restrictions on the sale of alcohol • You should seek specialist advice authorisation, and case failure to comply is a criminal • restrictions on shop trading days if you plan to provide any kind of offence and an agency is liable for • an agency must not disclose gambling activity or games of chance a fine of up to NZ$10,000 as well as weights and measures standards personal information outside • as a primary or ancillary part of your costs or other orders), or of New Zealand unless the • food safety and labelling legislation, proposed business or where you offer information will be subject to • the complainant or the Privacy and prizes in exchange for the purchase of broadly comparable protections as Commissioner takes the complaint goods or services. restrictions on sending commercial provided by the Act, or, where this to the Human Rights Review • or advertising/promotional is not the case, the person has been Tribunal, the breach constitutes messages by email, text (SMS), fax so advised and has consented to an “interference with privacy” or other electronic means. the disclosure. and the Tribunal awards costs or makes orders. The Act requires agencies to report privacy breaches to the Privacy Complaints are investigated in the first Commissioner and to affected individuals instance by the Privacy Commissioner, where it is reasonable to believe the and may be referred to the Director breach has or may cause serious harm to of Human Rights Proceedings if the affected individuals. Failure to report a Commissioner is unable to facilitate notifiable privacy breach to the Privacy a settlement. An individual may bring Commissioner without reasonable excuse proceedings in the Tribunal in his or her is a criminal offence punishable by a fine own name only if the Commissioner has of up to NZ$10,000. considered the matter and declined to pursue it further. A breach of the Information Privacy Principles does not automatically give rise to a right to damages or other mandatory or injunctive remedies.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 28 DecemberJuly 2021 2019 HOME 28 Key points Union membership is not compulsory Employers proposing to act in a way but all collective agreements must be that may have an “adverse effect” on Employment negotiated and concluded with a union. their employees, such as a proposal to • The Employment Relations Act 2000 is the primary piece of disestablish the employee’s role, must and health legislation regulating the workplace The Government is planning to legislate provide information about the decision in New Zealand. this term for a system of Fair Pay and consult with their employees in Agreements (FPAs), based either on good faith before the decision is made and safety • Fewer than 20% of employees an occupation or on an industry. As (subject to genuine although strict belong to unions. Unionism is currently proposed, a union would be confidentiality exceptions). law in strongest in the public sector, the able to initiate an FPA if that union meat industry and the waterfront. has at least one member within the Sale of a business/contracting out Strike action is not common and proposed FPA’s coverage. tends to be localised. When engaging in a sale, merger or New Zealand contracting out arrangement, as well The union must describe the boundaries • New Zealand has 11 public holidays as complying with the good faith/ and employees are entitled to four of the FPA and must be able to satisfy consultation requirements described weeks’ paid annual leave a year, one of two tests: above, an employer must negotiate with after 12 months’ employment. the proposed purchaser/new employer a representation test, requiring the • in relation to the employees. Such support of 10% or 1,000 employees negotiations must include discussion The Employment in the designated industry or about who will be offered employment occupation (whichever is lower), or Relations Act with the new employer, and on what • a public interest test, requiring terms and conditions. All employment relationships are evidence of harmful labour practices governed by the Employment Relations within the relevant industry or The Act also provides that “vulnerable Act 2000 (including senior and occupation, e.g., issues of low pay employees” (primarily cleaning and food executive employee relationships). or limited bargaining power. catering workers) are entitled to transfer Independent contractors are not to the new employer as of right and to governed by the Act, but the Courts Good faith bargain for redundancy payments with and the Inland Revenue Department the new employer if their services are can examine the “true nature” of the The parties to an employment not required. relationship to determine whether the relationship must not do anything to person is a contractor or an employee. mislead or deceive each other. They must be “active and constructive” and Agreements under the Employment “responsive and communicative” in their Relations Act must be in writing, dealings with each other. and may be individual (between an individual employee and the employer) Bargaining must be conducted in good or collective (between one or more faith. Employers and employees/ Marie Wisker – Partner unions and one or more employers). unions must, at a minimum, come to the T: +64 9 358 9845 M: +64 27 559 8571 Employers must hold a signed copy of bargaining table, listen and respond to E: [email protected] employment agreements. what the other party puts forward.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 29 Termination There is no statutory right to Unions and a half for working on a public redundancy compensation in Most individual employment holiday, four weeks’ paid annual leave New Zealand and, other than in very agreements are indefinite (i.e. they Only a small proportion of New Zealand limited circumstances, compensation is after 12 months employment and, continue until terminated) but the law businesses have a union presence. only payable if it is provided for in the after six months’ employment, five also recognises casual and fixed term However, unions may try to recruit employment agreement. days’ sick leave per year (increasing employment arrangements. Fixed term members at work and are entitled to to 10 days’ per year as from 24 July agreements are lawful, but subject to enter workplaces for union-related Dispute resolution 2021), bereavement leave of three certain restrictions. purposes. The Act encourages mediation as the days for a miscarriage or still birth and on the death of close relatives, one The employee can end an indefinite primary means of settling employment Where there is a collective agreement employment arrangement by giving the disputes. If mediation is unsuccessful, day on the death of any other person, in place, or collective bargaining has specified notice period. However, an the parties may have their dispute and 10 days’ family violence leave. been initiated, the union does not need employer can terminate an employee’s decided by the Employment Relations to seek the employer’s consent before employment only after following a Authority, an investigative body. If • A new public holiday – Matariki – to entering the worksite. Unions must prescribed legal process and only still unsatisfied, parties have a right of celebrate the Māori New Year has for genuine substantive reasons appeal to the Employment Court. exercise these access rights reasonably, been legislated for and will come such as redundancy, misconduct, and employers cannot unreasonably into effect from 2022. poor performance, abandonment or Very often, employment disputes are refuse entry. incapacity. An employee has 90 days solved in mediation and do not proceed following any termination to raise to litigation. • The Parental Leave and Employment a personal grievance claim against Working conditions Protection Act 1987 provides for the employer. Strikes and lockouts both parents to take specified Every employee in New Zealand is periods of parental leave (unpaid) The only lawful strikes or lockouts are An exception to these termination entitled to a number of basic rights. on the birth or adoption of a child. those that relate either to bargaining for provisions is available for businesses a collective agreement or to health and Primary caregivers are entitled to with fewer than 20 employees. They can safety issues. • The Minimum Wage Act 1983 up to 26 weeks’ government-funded take new employees on for a 90 day prescribes statutory minimum wages paid parental leave to a maximum trial period, provided this is agreed in writing between the parties at the time When a strike occurs, an employer can for adult employees, employees who amount (which is reviewed regularly) of hiring. There are strict requirements only use existing employees to perform are starting out (under 20 years of or to 100% of the parent’s previous regarding trial period clauses (for the work of the striking employees, age and meeting specific criteria) weekly earnings, whichever is example, agreements with trial clauses and then only if the existing employees and employees who are training (20 the lower. The scheme allows the must be signed before the employee agree to perform the work. External years and over and attending an mother of the child to claim the paid workers may only be employed when starts work). approved training course). These leave or transfer the payment to the the work is necessary for public health and safety reasons. rates are reviewed annually. child’s other parent, including same sex partners. • The Holidays Act 2003 provides all employees with up to 11 statutory • KiwiSaver is the New Zealand holidays a year (if the day is otherwise government’s superannuation a working day for the employee), time scheme. Employers are required

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 30 DecemberJuly 2021 2019 HOME 30 to contribute 3% of employees’ employer has informational reporting safety committees. PCBUs employing Another option is the ACC’s accredited gross earnings to an employee’s obligations that are typically due within more than 20 employees or with a employer programme under which chosen KiwiSaver scheme. All new two working days of each payday. moderate or higher risk profile are employers can elect to pay a reduced employees must be automatically The PAYE withheld must generally be required to do this at the request of the levy in return for funding all or a share enrolled in KiwiSaver but they can remitted to Inland Revenue. Inland workforce. For smaller businesses in low of any compensation entitlements choose to opt out in the first six Revenue may also require other risk industries, it is optional. incurred at their workplace. To be weeks. Existing employees can deductions such as payments towards accepted for the programme, the choose to join KiwiSaver at any time. student loans or child support. employer must satisfy a number of Total remuneration approaches Accident compensation criteria, including a minimum level of (where employer contributions are safety expertise and financial solvency. The Accident Compensation Act 2001 deducted from the employee’s Health and safety provides a statutory no-fault scheme salary) are generally permitted. Accident compensation benefits, but The Health and Safety at Work Act under which cover is available to those not earnings-related compensation, assigns responsibility for workplace suffering personal injury, and legal Discrimination are available to non-residents who are safety to “officers” and employing claims are prohibited. injured while in New Zealand. Under the Human Rights Act, entities. discrimination in employment on the Coverage is broad based and includes basis of an employee’s (or prospective Officers are directors and very senior most physical injuries, regardless of employee’s) sex, marital status, religious managers which, in the majority of whether they occur in the workplace beliefs, ethical beliefs, colour, race, cases is likely to be just the Chief or elsewhere. Unless sustained as the ethnic or national origin, disability, Executive. They have a positive duty victim of a crime, pure mental injury is age, political opinions, employment of due diligence to “take all reasonable not covered by the scheme. status, family status, sexual orientation steps” to ensure that the entity (defined or union involvement is subject to as the Person Conducting a Business Compensation for injuries can take the legal sanction. or Undertaking, PCBU) is fulfilling its form of payments for loss of earnings, obligations under the law. health care treatment, rehabilitation, an independence allowance for disability, Payroll tax The PCBU is required to ensure the funeral expenses and death benefits health and safety of all who work for it for dependents. The scheme is funded In addition to KiwiSaver contributions or could be put at risk by that work. This from a number of sources, including and Accident Compensation requires that it put in place processes levies on employers (linked to the Corporation (ACC) levies (see below), to eliminate or – if elimination is not amount of wages paid, with levy rates employers in New Zealand are required possible – minimise safety risks so far determined on the basis of injury rates to deduct “Pay As You Earn” payroll as is reasonably practicable. in the relevant industry), levies on tax (PAYE). Deductions are made on employees, taxes on vehicle registration a payday basis (which may be weekly, All PCBUs have the right to and taxes on petrol. fortnightly, monthly or more often if the appoint workers’ health and safety employer has multiple paydays) and the representatives and/or health and

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 31 Competition and anti-trust law in • taking advantage of a substantial The Commerce (Cartels and Other Anti-trust, New Zealand is administered through degree of market power for the Matters) Amendment Act 2017 allows the Commerce Act 1986. This: purpose of restricting entry into an exemption for collaborative conduct competition a market, deterring competitive between competitors where it is • prohibits restrictive trade practices conduct, or eliminating a competitor reasonably necessary and has not been from a market. entered into with the dominant purpose • regulates business acquisitions, and law in of reducing competition. • allows price controls to be imposed In relation to the last bullet point New Zealand in certain industries. above, the Government has announced It also provides for a clearance process its intention to align New Zealand under which an entity can apply to the more with Australia by adopting an Commerce Commission to test whether Restrictive trade effects-based test to distinguish the collaborative activity exemption practices between abuse of market power and applies. legitimate competition. It is a change The Commerce Commission is charged long advocated by the Commerce There is also the ability to seek with administering the Commerce Commission. authorisation, on public benefit Act. Part 2 of the Commerce Act grounds, of arrangements that might prohibits certain restrictive trade Engaging in a prohibited practice may otherwise be unlawful. practices including: result in a penalty of: The Commerce Commission has the • contracts, arrangements or • up to NZ$500,000 for individuals, power to conduct market studies in understandings which have the and the public interest – for example, purpose, effect, or likely effect of where there is reason to suspect substantially lessening competition • for a body corporate, the greater of market failure. in a market NZ$10 million or either three times the value of any commercial gain • price-fixing, restricting output and resulting from the contravention (if it Business acquisitions market-sharing arrangements among can be easily ascertained) or 10% of competitors Part 3 of the Commerce Act prohibits the turnover of the body corporate the purchase of shares in or assets • resale price maintenance and all its related bodies corporate. of a business where the acquisition arrangements by which suppliers of would have (or would be likely to have) goods set and enforce sale prices to the effect of substantially lessening be charged by re-sellers, and competition in a market. Andy Nicholls – Wellington Managing Partner T: +64 4 498 6319 M: +64 27 491 4892 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 32 DecemberJuly 2021 2019 HOME 32 In assessing whether a merger is likely Parties to an acquisition which may ALERT Price control to substantially lessen competition, the raise competition concerns may Before relying on these “indicators”, Commission will analyse the merged it is wise to seek specific advice Part 4 of the Commerce Act contains a seek pre-transaction clearance from firms’ ability to raise prices and/or and carefully consider the relevant mechanism to impose price control on the Commission, which, if granted, reduce product quality or service, market definitions and dynamics. the providers of particular goods and immunises the deal from challenge by relative to what would have occurred It is also worth noting that they are services in circumstances where there the Commission or third parties. The without the acquisition. Relevant to only a starting point for the analysis is limited competition. There are no this enquiry are the market share of and that falling outside them will not clearance regime is voluntary and it is restrictions on the industries to which the merged entity, the market shares of necessarily mean that an acquisition common for mergers to proceed on a Part 4 may apply. will be judged to lessen competition. non-notified basis. other participants, the likelihood of new entry, the merged entity’s relationship For example, market shares may be Industries currently subject to Part 4 with suppliers and purchasers, and high but the conditions of entry or The Commission aims to decide regulation are: whether there are features of the expansion may be benign. clearance applications within 40 market which are suggestive of the airports, electricity lines services working days of the application being potential for collusion and discipline. • registered. However, depending Maximum penalties for an acquisition in and the gas industry (under the Commerce Act 1986). on the scale and complexity of the The Commission’s guidance is that breach of the Commerce Act are: transaction, this timeframe can increase a merger or acquisition is unlikely to Specific legislation regulating raise Commerce Act concerns if, after • NZ$500,000 for individuals, and/or significantly. A recent clearance competition in particular industries the acquisition: application took 11 months from the • NZ$5 million for companies. applies in the case of: date of registration until the ultimate • the three largest firms in the market • An order may also be made requiring decision was made. telecommunications (under the have a combined market share of less divestment of specified assets or • Telecommunications Act 2001) than 70% and the merged entity has a shares (which can potentially include unwinding the merger). market share of less than 40%, or • dairy (under the Dairy Industry ALERT Restructuring Act 2001). • the three largest firms in the market Businesses should seek advice have a combined market share of on the likely timing of a clearance more than 70% and the merged entity application process and the has a market share of less than 20%. potential implications of this prior to entering into the formal clearance regime.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 33 Key points Copyright New Zealand is in the throes of a copyright review in which officials are Intellectual considering root and branch reform. • New Zealand’s intellectual property The Copyright Act grants exclusive laws are derived from English rights to: property in legislation and common law. The copyright term for industrially applied three-dimensional works • copy a work is usually 16 years. Protection for • They reflect international norms, the New Zealand industrially applied “works of artistic TRIPS Agreement and New Zealand’s • issue copies of the work to the craftsmanship” lasts for 25 years. World Trade Organisation public obligations. The copyright in literary, dramatic, • play, perform or show certain works musical and artistic works generally • Principal statutes are the Copyright in public lasts for the life of the author plus 50 Act 1994, the Patents Act 2013 and years. The term for communication the Trade Marks Act 2002. “communicate” the work • works, films, sound recordings and typographical works is 50 years. • make an adaptation of the work, and Public performances of various authorise any of these activities. • kinds may also be the subject of separate protection given in certain Works that can be subject to copyright circumstances to performers (but not in include: literary works, computer the performance of sporting activities). programmes, dramatic works, artistic In addition, the Copyright Act protects works (which may include drawings, “moral rights” which, (depending on the moulds, dyes etc. for utilitarian items circumstances) may include: a right to such as machinery or clothing), musical be identified as the author, a right to works, sound recordings, films and object to derogatory treatment of a broadcasts, including over the Internet. work, and a right against being falsely attributed as the author of a work. To qualify for protection, a work must be “original”. Under New Zealand law, moral rights are not assignable. They can, however, In accordance with the Berne be waived. Convention (to which New Zealand is a signatory) copyright exists as soon as the work is created. A work does not need to be registered to gain protection in New Zealand (and we have no Matt Sumpter – Partner Copyright Register). T: +64 9 357 9075 M: +64 27 531 3919 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 34 DecemberJuly 2021 2019 HOME 34 Patents Registered designs Trade marks Company names

Protection under the Patents Act 2013 New and original industrial designs are Registration of a trade mark under A company name will not be approved allows the owner of a patented invention registrable under the Designs Act 1953 the Trade Marks Act 2002 gives the if it is identical (or nearly identical) to to prevent others from exploiting – e.g. if their shape, configuration, pattern, or proprietor the exclusive right to use the an existing company name. Registering making, using or selling – it for 20 years ornamentation has visual appeal. The trade mark in relation to the goods and/ a company or reserving a company from the date of the patent. period of protection is for an initial five or services for which it was registered. name gives no right to use the name as years, with rights of renewal for two a trade mark, and provides no defence A patent will be granted where the further five-year periods. The Act permits comparative to infringement of third party trade mark Commissioner of Patents is satisfied advertising involving registered rights. (This is also the case in respect “on the balance of probabilities” Because the Copyright Act protects trademarks, except where the of domain names.) that the application meets the industrially applied artistic works and advertisements are “unfair” to the requirements under the legislation. The useful articles in New Zealand, some reputation of the mark. The Act also most important of these are that the businesses are content to rely on contains “anti-dilution” provisions Domain names invention meets a universal or absolute copyright law only (although there are to prevent unfair use of well-known novelty test and involves an inventive advantages to gaining registration under registered marks in relation to goods Regional domain names, such as step (meaning that it is not “obvious”). the Designs Act). and services which are dissimilar to “.co.nz” and “.govt.nz”, are registrable those for which the mark is registered. in New Zealand. New Zealand courts have protected businesses against Certain things are excluded from Marks involving Māori language or “cybersquatting” in some instances. patentability, including methods of symbols must be referred to a special There is also now a dispute resolution medical treatment of human beings committee for consideration before service operated by the Domain by surgery or therapy, a method of they are eligible for registration. Name Commission, similar to the UK diagnosis practised on human beings, Nominet service. and inventions the commercial The Madrid Protocol allows for a multi- exploitation of which would be contrary country trade mark application process. to public order or morality.

“Embedded software” may be patented. “Swiss-type” patent claims in the pharmaceutical area are possible.

Various procedures are open to third parties wishing to object to or oppose a patent, both before and after grant. These include asking for a re-examination.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 35 Passing off Confidential information

The law of passing off may also be New Zealand law protects confidential invoked to protect business goodwill information relating to trade secrets, and is frequently used for the such as business methods and protection of trade marks (whether or industrial processes. As with passing not registered), names, logos, packaging off, the principles are similar to those designs and shapes. The principles that have been developed in English are similar to those that have been and Australian law. Non-disclosure developed in English and Australian agreements (NDAs) are useful for common law. This law is augmented by providing contractual rights to prevent a consumer protection statute, the Fair disclosure of confidential information Trading Act 1986, which may capture and can be used to supplement misleading conduct in trade involving common law rights. trade marks (see the Consumer Protections in New Zealand section).

Parallel importation

Importers can import lawfully made goods from foreign countries in commercial quantities without infringing the copyright of the “official” distributor in New Zealand, or of the overseas manufacturer. However, the prohibition against importing pirated goods, made without the copyright owner’s consent, remains in force.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 36 December 2019 HOME 36 Financial Key points ALERT Banks • New Zealand has a highly developed Financial services providers must Any financial institution that carries out financial services regulatory regime, register on the Financial Service any activity in New Zealand, directly services in with comprehensive licensing Providers Register. Those who or indirectly, with a name or title that requirements. provide retail services need includes “Bank”, “Banker” or “Banking” New Zealand to join an approved dispute must be authorised to use that name • New Zealand is favourably regarded resolution scheme. in New Zealand by the Reserve Bank. for its “ease of doing business”. Overseas banks may use restricted words when carrying on activities in • New Zealand operates an open A range of disclosure, money handling, New Zealand only if they register as foreign exchange system. financial reporting and other conduct registered banks or are authorised by obligations also apply. the Reserve Bank (but only to the extent of the authorisation). The Reserve Bank Overview of Foreign financial service providers who has published guidance notes on the licensing, registration provide financial services solely to use of restricted words by overseas wholesale clients (such as investment banks, and a class authorisation for and compliance businesses, fund managers, large overseas banks undertaking banking requirements companies, government entities and lending, financial advisory services, and certain eligible investors) are capital and debt market issuances, and foreign exchange and derivative market Licensing is required for registered relieved from registration and licensing activities for wholesale customers. banks, insurers, non-bank deposit- requirements. takers, fund managers and derivatives Registered banks are subject to the issuers (in respect of products offered A financial institution which is engaged full regulatory oversight (including to retail investors), certain supervisor in certain financial activities in prudential supervision) of the Reserve trustees, financial advice providers, New Zealand must comply with the Bank. Only financial institutions that discretionary investment management requirements of New Zealand’s anti- can demonstrate an ability to carry on service (DIMS) providers, providers of money laundering and countering their business in a prudent manner, and crowd funding and peer-to-peer lending financing of terrorism legislation. which have appropriate standing and services, operators of financial product repute, are permitted to be registered markets (such as a stock exchange) as banks in New Zealand. The Reserve and auditors. Bank takes into account both qualitative (the applicant’s financial standing and ability to manage its business prudently) and quantitative (key prudential requirements) criteria. Penny Sheerin – Partner T: +64 9 358 9817 M: +64 27 556 6516 E: [email protected]

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 37 Overseas banks must have the approval • establishing and complying with “fit • registration and governance Managed/collective of, and comply with, the prudential and proper” policies for directors requirements for managed requirements of their home supervisor and senior officers. investment schemes to conduct banking business in investment schemes, debt New Zealand. Life insurers must maintain at least securities, KiwiSaver and If a managed investment scheme one statutory fund that relates superannuation schemes is offered to retail investors in solely to the insurer’s life insurance New Zealand, it will need to be Non-bank deposit takers business and is available to meet life • financial reporting obligations for registered in New Zealand under insurance liabilities. issuers, fund managers, registered New Zealand law. Registered managed Anyone who takes deposits or offers investment schemes are highly debt securities to retail investors banks, insurers and other licensed Generally, an overseas entity carrying regulated and must comply with and carries on the business of entities. Each reporting entity must on business in New Zealand will not be specific registration, disclosure and borrowing and lending money must prepare audited financial statements able to use a name or title including governance requirements. The manager be licensed as a non-bank deposit (or group financial statements, if it the words “insurance”, “assurance”, of the scheme must be licensed and taker by the Reserve Bank. Relief can “underwriter” or “reinsurance” (or similar has any subsidiaries) and register an independent licensed supervisor be obtained for overseas banks in words), without an exemption from the these with the New Zealand (trustee) must be appointed. some circumstances. Reserve Bank. Companies Office, and If the scheme is marketed solely to Non-bank deposit takers must comply • investor money handling rules for wholesale investors in New Zealand, it with a range of prudential obligations Offering investments will not need to be registered but will under the applicable legislation. offers of derivatives to both retail in New Zealand and wholesale investors. still be subject to fair dealing provisions. Insurers Various obligations apply to how The Trans-Tasman mutual recognition financial products are created, regime allows Australian offerors All insurers and reinsurers carrying on promoted and sold to both retail and to use their Product Disclosure insurance business in New Zealand wholesale investors in New Zealand. Statements (PDS) and prospectuses must be licensed by the Reserve Bank. These include: in New Zealand, without requiring Licence obligations include: that the manager be licensed. Certain • disclosure requirements when warning statements and local filings are required. • maintaining solvency and filing making a regulated offer (refer to the solvency statements in accordance Investing in New Zealand’s capital with standards prescribed by the markets section) Reserve Bank • fair dealing rules which prohibit • having an appointed actuary disclosure that is likely to mislead or deceive the public (these apply to • obtaining, publishing and disclosing both retail and wholesale offers) to New Zealand policy holders and the Reserve Bank current financial strength ratings (i.e. a credit rating) from an approved rating agency, and

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 38 DecemberJuly 2021 2019 HOME 38 The Asia Regional Funds Passport This includes financial advisers, banks, Registered providers can be allows offerors from New Zealand, securities issuers, fund managers, deregistered if their registration Australia, Japan, South Korea and custodians, money managers, credit is likely to be misleading as to the Thailand to offer products to investors contract providers, credit card extent financial services are provided in each other’s countries. To qualify, providers, travellers cheque providers, in New Zealand or from a place of various criteria must be met, including currency exchanges, insurers, trustees, business in New Zealand, the provider that the fund must have US$500 million listed companies, issuers of derivatives is regulated by New Zealand law or under management and US$1 million to the public and foreign exchange the registration would damage the of equity, and the offering document dealers. integrity or reputation of New Zealand must be compliant with the laws of the financial markets. home country. Other requirements To prevent misuse of the FSPR, include that the fund manager must be registration is not permitted in certain FSPs are required to give specific licensed in their home jurisdiction and circumstances, including merely warnings and information in relation comply with New Zealand disclosure because the FSP’s financial services to their registration, non-compliance requirements, and the Financial Markets are accessible by (and not provided to) with which will be a ground Authority (FMA) must provide sign- persons in New Zealand, if the FSP has for deregistration. off to confirm compliance with the wholesale clients only and does not passport rules. have a New Zealand place of business, The FSPR Registrar has powers to or if the services provided to persons require the provision of information in New Zealand are below the threshold to assess whether the registration Financial Service specified in regulations. requirements are, and continue to be, Providers Register met and to deregister FSPs for failure to Registration on the FSPR is not a provide that information. Anyone who is in the business of licence or an endorsement by the FMA. providing financial services to retail clients in New Zealand (or provides Depending on the nature of the wholesale services from New Zealand, financial services offered by the or is required to be licensed or registered entity in New Zealand, it may registered under any other Act), must also need to obtain a market services register on the Financial Service licence. Providers Register (FSPR). If financial services are provided to retail clients, the FSP must also join an approved dispute resolution scheme.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 39 Financial advisers Reduced requirements apply in relation New Zealand operates a very open Anti-money laundering to services provided to wholesale regime. Borrowers may raise finance and discretionary clients (such as investment businesses, on and off-shore and in the currency legislation fund managers, large companies, of choice. Banks are actively engaged investment managers The New Zealand anti-money government entities and certain eligible in the provision of short and medium- laundering and countering financing of FSPs providing advice on financial investors). to-long term debt to the consumer, terrorism (AML/CFT) regime requires products or investment planning commercial and corporate sectors. overseas entities engaged in certain services to retail clients in New Market forces determine the level of financial activities in the ordinary Zealand must: Brokers and custodians interest rates. course of business in New Zealand to: Brokers and custodians who carry on • obtain a financial advice provider the business of receiving and holding, • carry out various levels of customer licence from the FMA Repatriation of funds paying or transferring client money monitoring and due diligence, • comply with new legislative duties or client property (known as a “client There is no restriction on the identity verification, suspicious and obligations when giving money or property service”) must repatriation of capital or earnings of activity reporting, auditing and regulated financial advice comply with certain disclosure and a New Zealand business to overseas record keeping in accordance with conduct obligations. investors. This includes the remitting the AML/CFT legislation • comply with new disclosure of dividends, profits, interest, royalties, requirements prescribed in Fewer conduct obligations apply if the management fees, etc. In many cases, • undertake and prepare a written regulations, and services are provided only to certain however, non-resident withholding tax risk assessment of the risk of money • comply with the Code of wholesale clients. will be required from those payments. laundering and the financing of Professional Conduct for Financial (For more information on New Zealand terrorism that it may reasonably Advice Services, which comprises tax, please refer to the section on expect to face in the course of its of nine standards relating to ethical Foreign exchange market New Zealand’s cross border tax business, and behaviour, conduct and client regime.) There are no restrictions on the buying care, and competence, knowledge • establish, implement and maintain an and selling of foreign currencies. The and skill. AML/CFT compliance programme New Zealand banking system offers a under the administration of a Discretionary investment managers full range of foreign exchange services dedicated compliance officer. must be licensed by the FMA and including spot, forwards, futures, meet certain disclosure requirements options and the more sophisticated and duties. derivative products. Issuers of derivatives to retail clients must be licensed.

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 40 DecemberJuly 2021 2019 HOME 40 Other regulations

New Zealand has also rules regarding:

• registration as an overseas company when a foreign company is carrying on business in New Zealand

• compliance with FATCA (Foreign Account Tax Compliance Act), AEOI (Automatic Exchange of Information) and Common Reporting Standards (CRS), and

• registration and establishment of limited partnerships.

ALERT This summary is necessarily generalised. There may be exceptions depending on your particular circumstances. We suggest you seek advice before proceeding with any proposal.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 41 Investing in Key points Capital markets in Takeovers Code and • New Zealand has a stock exchange New Zealand Overseas Investment Act which comprises two main securities NZX operates the two main capital All listed companies are subject to the New Zealand’s markets – the NZX Main Board and markets in New Zealand: New Zealand Takeovers Code, which the NZX Debt Market operated regulates changes in the voting rights of by NZX. capital • the NZX Main Board, New Zealand’s “code companies”. • The Takeovers Code restricts principal market for equity markets investors and their associates securities, with around 180 issuers, from holding or controlling more which allows investors to trade in ALERT than 20% of the voting rights in a some of New Zealand’s largest and A code company is any New Zealand “code company”, which includes most well-known companies, and company that is listed or which has listed companies. 50 or more shareholders and 50 or • the NZX Debt Market, which more share parcels. • The Overseas Investment Act allows investors to trade in a wide also applies to investments in variety of debt securities, including New Zealand listed companies. New Zealand government bonds. • There are laws against insider trading and market manipulation, which NZX also operates the NZX Derivatives are enforced by the New Zealand Market, which includes the Global Dairy Financial Markets Authority. Futures and Options Market and the Equity Derivatives Market.

New Zealand’s capital markets are well regulated, with developed and comprehensive rules applying to issuers and market participants. NZX is primarily responsible for regulating the markets and is a member of the World Federation of Exchanges. The New Zealand Financial Markets Authority, the government regulatory agency, also regulates the markets operated by NZX and NZX itself, as the licensed market operator. Rachel Dunne – Partner T: +64 9 357 9626 M: +64 27 553 4924 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 42 DecemberJuly 2021 2019 HOME 42 The Takeovers Code restricts a person, The Takeovers Code permits a person, Insider trading and New Zealand has a general prohibition together with its associates, from together with its associates, to hold against market manipulation, which holding or controlling more than 20% of or control voting rights above the 20% market manipulation captures a range of behaviours such the voting rights in a code company or threshold in certain circumstances, as publishing a false or misleading increasing a holding or control that is including a full or partial takeover New Zealand has insider trading statement that is likely to affect already above 20%. offer. The procedure for undertaking laws that prohibit investors trading trading in quoted securities or doing a takeover offer is detailed in the where they hold information that is something that creates a false or Takeovers Code and includes a number not generally available and which a misleading appearance of trading. of specific timing and disclosure reasonable person would expect to requirements. The Takeovers Panel is have a material effect on the price of A breach of the insider trading or the regulatory body responsible for the quoted securities, regardless of market manipulation laws can result administering the Takeovers Code. the source of that information. in civil or criminal liability for the person responsible, as well as possible In addition, the Overseas Investment Passing on such information to accessory liability for others involved Act may apply to investments in another person or advising a person to in the contravention. New Zealand’s capital markets. See the hold or trade securities while holding Overseas Investment in New Zealand such information, known as “tipping”, section for further details. can also breach New Zealand insider trading laws.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 43 Fundraising in Key points Making an offer in Exclusions and • Issuers are required to prepare New Zealand exemptions and register a “Product Disclosure New Zealand’s securities laws are set There are a number of exclusions New Zealand Statement” in order to offer financial out in the Financial Markets Conduct under the Financial Markets Conduct products unless an exclusion or Act, which is enforced by the Financial Act, including bright line tests that exemption is available (such as for Markets Authority. provide clarity as to when New offers to wholesale investors). Zealand investors are eligible to be • Listing on one of the markets Generally, issuers are required to offered financial products without operated by NZX may be prepare and register a Product any disclosure documentation, or with undertaken in conjunction with a Disclosure Statement or “PDS” limited disclosure. This includes offers fundraising offer, generally using the before offering financial products in to wholesale investors, same class same document. New Zealand. The PDS sets out key offers, and dividend reinvestment plans information for retail investors about (subject to certain conditions). the financial products on offer and has strict content requirements that depend Another exclusion is for crowdfunding, on the type of financial product being which allows issuers to raise up to offered. For offers of debt securities NZ$2 million in a 12 month period and managed investment products, through a crowdfunding offer with external supervisor and licensing reduced disclosure requirements. obligations also apply. These offers have to be made through a licensed crowdfunding Outside the heavily regulated PDS, platform, of which there are a number the advertising regime is flexible and currently operating. does not place any specific content restrictions upon advertisements, other If an investor wishes to make an than requiring the inclusion of certain offer in New Zealand but is unable disclaimers and that no information, to fit within one of the exclusions image or sound is inconsistent with or class exemptions, it is possible the content of the PDS (for advertising to apply for a bespoke exemption released after the PDS has been from the New Zealand Financial registered). Markets Authority.

New Zealand and Australia have a mutual recognition regime for the offering of financial products, which enables an offer made in one country to be easily Rachel Dunne – Partner extended to the other country. T: +64 9 357 9626 M: +64 27 553 4924 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 44 DecemberJuly 2021 2019 HOME 44 Fair dealing and other Listing potential liabilities In conjunction with capital raising, an The key requirements when seeking issuer may wish to list on one of the a listing on the NZX Main Board The Financial Markets Conduct Act markets operated by NZX (see the are to have an anticipated market prohibits issuers and others engaging Investing in New Zealand’s capital capitalisation of at least NZ$10 in conduct or making statements that markets section for more details). million and a spread of at least 20% are misleading or deceptive in relation Generally, the document used for of the class of equity securities to be to financial products. This has a broad fundraising can also be used for listing quoted held by at least 100 persons application, although attracts civil purposes. Otherwise, a separate not affiliated with certain company liability only. compliance listing document can insiders (or an appropriate spread to be prepared. ensure a sufficiently liquid market). Issuers, and their directors, undertaking a regulated fundraising The process to apply for listing There are no spread requirements for offer are subject to potential is relatively straightforward, the NZX Debt Market but the nominal criminal liability for serious although there are certain timetable amount of securities to be quoted misconduct and civil liability for less requirements that must be borne must be at least NZ$10 million. serious misconduct. in mind.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 45 Insolvency in Key points Liquidation Receiverships • Whether you are starting a new A liquidator is usually appointed to a A receiver recovers the company’s business in New Zealand, investing in company by either its shareholders assets in order to repay the secured New Zealand an existing business, or dealing with (usually a 75% majority is needed), creditor. They have power to manage other New Zealand-based parties – or the Court, on the application of the company and deal with its assets. there’s always a risk that an involved a creditor. A receiver owes only limited duties party will become insolvent. to other parties, such as unsecured The principal duty of a liquidator is to creditors. Typically, receivers are • Receiverships, liquidation and take possession of, protect, realise appointed by a creditor with security voluntary administration are the and distribute company assets (or the over all a company’s assets, although most commonly used formal proceeds of from sale of those assets) appointments can be over an individual insolvency procedures for to the company’s creditors. Liquidators asset. A contractual right to appoint companies in New Zealand. in New Zealand have a statutory right to receivers is necessary. Shareholders or • The ability of a creditor to use the claw back preferential payments made directors of a company cannot appoint various insolvency regimes will by the company in certain periods a receiver, but may ask a secured depend on the nature of the debt preceding liquidation, or payments creditor to appoint a receiver. owing, for instance whether it is at undervalue. The liquidator then secured or unsecured. Broadly, distributes those realisations to the Receivers are not agents of the New Zealand is a secured creditor creditors. Employees and the Inland creditors who appointed them. Rather, friendly jurisdiction. Revenue Department (for some taxes) except in liquidated companies, they are paid before unsecured creditors. are agents of the company. Receivers’ reports are available on-line. Liquidation does not prevent secured creditors from exercising their rights over secured assets, although employees and the Inland Revenue Department are paid before general secured creditors from proceeds of inventory and receivables.

Liquidators’ reports are publicly available through the on-line Companies Register.

Michael Arthur – Partner T: +64 9 357 9296 M: +64 27 209 4999 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 46 DecemberJuly 2021 2019 HOME 46 Voluntary administration Compromise A key feature of the PPSA is that its Personal insolvency application is not affected by a secured Voluntary administration provides a In addition to the above formal party having title to the security – bankruptcy mechanism for the administration of procedures, it is routine in New Zealand collateral. A debtor with rights in the business, property and affairs of an for companies facing difficulties Bankruptcy proceedings are governed personal property can grant a security insolvent company or a company that to seek to compromise with their by the Insolvency Act 2006. Bankruptcy interest in that property even though may become insolvent in the future. The creditors. Those compromises can affects an individual’s legal status. Its it has no title to the property (such objective of voluntary administration be informal – i.e. created by a simple consequences include; vesting the as where the property is subject to a is to maximise the chances of the contract – or they may be more formal. bankrupt’s property in the Official company, or as much as possible of its The Companies Act has procedures retention of title clause or held under Assignee, the bankrupt being limited business, continuing in existence or, by which all creditors can be bound a lease). in the business activities he or she can where that is not possible, to produce to a compromise if a majority of undertake and the Official Assignee a better return for the company’s creditors vote in favour of it. Again, The PPSA determines the priority being entitled to recover assets that creditors and shareholders than would 50% by number and 75% by value (of of any security interest taken over result from the immediate liquidation of those voting) must vote in favour for the bankrupt has transferred before personal property. In general, a the company. a majority. the bankruptcy. A corporation, perfected security interest has priority association or company incorporated over an unperfected security interest. Voluntary Administration imposes a or registered under any Act may not be Perfection is usually achieved by moratorium period, generally of around Personal Properties adjudicated bankrupt. five weeks but it can be extended. registration on the Personal Property During this time, the enforcement Securities Act (PPSA) Securities Register (an on-line register). of charges is prevented as are Priority between perfected security New Zealand’s PPSA regulates all Regulation of insolvency taking possession of property, court interests is determined by which security interests in personal property. proceedings, enforcement proceedings secured party is first to either register, practitioners “Security interests” include traditional or the making of demands under a or take possession of the collateral. guarantee. securities interests (mortgages, fixed Insolvency practitioners must be There are important exceptions to the and floating charges, pledges and licensed by an accredited body under order of priority, however. The moratorium gives the voluntary liens) as well as in-substance security the Insolvency Practitioners Regulation administrator an opportunity to develop interests (such as conditional sale Act 2019 and registered on a public Failure to register a security does not a rescue plan which must then be agreements, retention of title provisions register maintained by the Registrar adopted at a meeting of creditors. A invalidate that security, but it may and leases of 12 months or more). of Companies. To obtain a licence, majority of creditors is 50% by number prejudice its priority position. and 75% by value (of those voting). applicants must have the requisite qualifications and meet a “fit and proper person” test. Licences must be renewed every five years, with renewal dependent upon meeting ongoing competence requirements.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 47 Resolving Key points Legal system Hierarchy of courts • New Zealand has a New Zealand’s common law system The District Court is the court of first common law system and an is similar to that in England and has instance for most criminal prosecutions disputes in independent judiciary. familiarity with most international legal and many civil cases. In criminal structures – especially in the finance cases, whether the District Court has New Zealand has a hierarchy of • and corporate law areas. New Zealand jurisdiction often depends upon the New Zealand courts running from the District has a single legal profession in which nature and seriousness of the alleged Court to the High Court, the Court members commonly hold a practising offence. In civil cases, the District of Appeal and the Supreme Court. certificate as both a barrister Court will have jurisdiction if the amount • Civil disputes are often solved by and solicitor. in dispute is NZ$350,000 or less. negotiation or mediation between Above that amount, the claim must be the parties. Judges are appointed by the Governor- advanced in the High Court. The High General on the advice of the Attorney- Court also has exclusive jurisdiction in General and have a strong tradition certain matters as directed by statute, of judicial independence. Their e.g. under the Companies Act 1993. appointments are open-ended. There is generally one right of appeal – from the District Court to the High Court or from the High Court to the Court of Appeal. Second appeals require the leave of either the court appealed from or the court appealed to. All appeals to the Supreme Court require the leave of that court.

Nicola Swan – Partner T: +64 4 498 6389 M: +64 27 308 6000 E: [email protected]

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 48 DecemberJuly 2021 2019 HOME 48 The Supreme Court does not entertain Alternative dispute International dispute appeals for the sole purpose of error correction, and will generally not grant resolution for resolution leave unless the appeal involves: civil disputes Chapman Tripp is the only New Zealand • a matter of general or public firm ranked internationally for its Civil disputes are often resolved by importance expertise in international arbitration. negotiation directly between the parties Our team regularly acts in international a substantial miscarriage of justice, or or by mediation. Such resolution may • commercial arbitrations and can assist occur at any time, whether before or matters of general with drafting arbitration clauses, urgent • after judgment in any proceeding, but commercial significance. applications linked to such arbitrations, most often resolution occurs before and enforcement of arbitral awards. trial (or, in some cases, shortly after a The Court of Appeal is therefore the trial has begun). final appellate court for most cases. Chapman Tripp also advises on all aspects of international trade and It is a requirement for many civil Outside the general court structure are a investment agreements, including proceedings in the District Court range of specialist courts and tribunals. resolving disputes through the that the parties first attend a judicial These include the Employment Relations architecture provided by those settlement conference before a trial Authority and the Employment Court, agreements. New Zealand is a strong is allocated. the Environment Court and the Taxation advocate for free trade and is a Review Authority. signatory to a number of trade and Civil disputes may also, with the investment treaties. Many of those agreement of the parties, be resolved In New Zealand, Prosecution Guidelines agreements include investor-state by private arbitration (usually pursuant do not permit a prosecutor to initiate or dispute settlement mechanisms, to an arbitration clause in a commercial to invite a “plea bargain” in any criminal including the Comprehensive and contract). The New Zealand courts proceeding. However, it is permissible Progressive Trans-Pacific Partnership are strongly supportive of arbitration for a defendant to propose an Agreement. and will assist where necessary in the arrangement under which a guilty plea establishment of arbitral tribunals, will be entered either to some existing interim orders and enforcement. New or amended charges, on the basis Zealand’s Arbitration Act 1996 is based that other charges will be withdrawn on the internationally recognised Model or reduced. Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 49 Opportunities to emigrate to Applicants for any visa must be of good ALERT New Zealand or to obtain a visa are character, have an acceptable standard Emigrating to Only solicitors and licensed currently strictly limited as part of of health and hold a valid passport immigration advisers and legally New Zealand’s response to COVID-19. which expires later than three months able to give immigration advice in New Zealand All arrivals, except from Australia, the after your proposed date of departure. New Zealand. It is important that Cook Islands and Niue, must undergo a you establish the credentials of 14-day managed quarantine. your adviser as Immigration will not New Zealand residence generally accept applications where New Zealand has a reasonably open the advice has come from someone door immigration policy, particularly for The main paths to New Zealand either unlicensed or not specifically skilled migrants and for entrepreneurs residence are through the exempted from holding a licence. with the resources and capital to following categories: This requirement applies also to advice given from off-shore. contribute to the economy by setting up a business in New Zealand. • Skilled Migrant • Work to Residence Visas • Investor Entrepreneur, and If you are not a New Zealand or an • Australian national, you will need a • Family. visa to work in New Zealand unless you are on a short visa for business meetings only. Citizenship

Visa types include: To qualify for citizenship, the applicant must have been resident for at least five • Work Visa (temporary) years, be free of any convictions and have been present in New Zealand for • Work to Residence Visa at least: • Study to Work Visa • 1,350 days during the five years • Visitor Visa (Business or Tourist) immediately preceding the application, and • Highly Skilled Visa (Silver Fern) 240 days in each of these five years. • Entrepreneur Work Visa (Business) • • Residence Visa For more information go to the Immigration New Zealand website at: • Working Holiday Visa immigration.govt.nz • Student Visa

Doing business in New Zealand CHAPMANA GUIDE FOR TRIPP INVESTORS GUIDE FOR INVESTORS 50 DecemberJuly 2021 2019 HOME 50 Tax residence

Residence for income tax purposes is distinct from, and does not depend on, a person’s immigration status. Once a person becomes “resident” in New Zealand for income tax purposes, income tax is generally imposed on that person’s worldwide income.

Individuals are regarded as tax resident if they have a permanent place of abode in New Zealand or are present in New Zealand for more than 183 days within any 12-month period. Under the day count test, a person will be treated as becoming tax resident on the first day of the 183 days they are present in New Zealand.

New migrants and, in certain cases, returning New Zealanders who have not been resident for tax purposes in New Zealand for at least 10 years, can qualify for temporary transitional residence status. A transitional resident is exempt from New Zealand income tax on their foreign-sourced income, other than income from employment or the supply of services for a period of four years after they meet the test for New Zealand tax residency.

Doing business in New Zealand A GUIDE FOR INVESTORS July 2021 HOME 51 AUCKLAND WELLINGTON CHRISTCHURCH Level 34, PwC Tower Level 17 Level 5 15 Customs Street West 10 Customhouse Quay 60 Cashel Street PO Box 2206, Auckland 1140 PO Box 993, Wellington 6140 PO Box 2510, Christchurch 8140 New Zealand New Zealand New Zealand

T: +64 9 357 9000 T: +64 4 499 5999 T: +64 3 353 4130

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