Investing In New Zealand

By Buddle Findlay

New Zealand property and land law

Land title system

New Zealand utilises a land title system based on the Torrens system which is used in a number of other countries including Australia, the United Kingdom and Singapore. The primary advantage of the Torrens system is that it enables a purchaser of land to rely on the title as it is recorded in the public register of land. Furthermore, the Crown guarantees that the details of the register are true and complete.

Legal title to land ownership in New Zealand is a matter of public record. Almost all land in private ownership is held under the land registration and transfer system as enacted in the Land Transfer Act 1952.

Environmental law

Environmental law in New Zealand has undergone significant development in recent years. The principal environmental legislation in New Zealand is the Resource Management Act 1991. The Resource Management Act is internationally recognised as a progressive piece of legislation.

The purpose of the Resource Management Act is to promote the sustainable management of natural and physical resources. Rather than a prescriptive approach to the use of resources the legislation adopts an approach which may be broadly described as permissive.

The Resource Management Act is administered by a hierarchical structure of national, regional and local policy statements and plans. All resource use and related consent requirements are subject to a uniform regime throughout the country. Depending upon the nature of an activity and its effect on the environment, a resource consent may be required. The consent may be granted with or without conditions. A number of resource consents may be required depending on the nature of the proposed activity.

The Resource Management Act also imposes liability for environmental offences.

Land Information and Statutory Compliance

As in many other jurisdictions, sometimes critical information relating to land issues will be held by local authorities. This information can be searched. A number of other general compliance statutes also create landowner or occupier liabilities.

Agreements for sale and purchase of land

An agreement for sale and purchase of land in New Zealand, and certain other dispositions of land, must be in writing and signed by the parties to the transaction or their lawful representatives. An agreement for sale and purchase is generally prepared by the vendor’s real estate agent or solicitor and generally a purchaser pays a deposit to the vendor’s agent, which is released to the vendor when the agreement becomes unconditional.

A prudent purchaser will either make a full investigation of the property employing professional advisers where appropriate before entering into an agreement or (more commonly) make any agreement subject to conditions which allow that investigation to occur subsequently. Common conditions relate to title investigation, building inspection, resource management issues, arranging finance and (in respect of leased commercial or industrial buildings) investigation of leases.

Foreign Investment Controls

Overseas Investment Act 1973
New regime

The Overseas Investment Act 1973, as amended in 1995, (Overseas Investment Act) is the statute which controls foreign investment in New Zealand. New regulations (the Overseas Investment Regulations 1995) have also been passed which specify the qualifying transactions in more detail and procedures for applying for consent.

Under the Regulations an “overseas person” must obtain consent to acquire or take “control” of 25 percent or more of New Zealand:

  • Businesses or property worth more than $50 million;
  • Land over five hectares and/or worth more than $10 million;
  • Land on most off-shore islands; and
  • “Sensitive” land over 0.4 hectares (e.g. on specified islands, containing or next to reserves, historic or heritage areas, the foreshore or lakes).

Non-Land transactions

For non-land investments an overseas person must obtain consent under the Regulations to:

  • establish a new business where the total expenditure to be incurred in setting up the business exceeds $50 million;
  • acquire 25 percent or more ownership or control of a New Zealand company where the consideration for the transfer or the value of the New Zealand company’s assets exceeds $50 million;
  • increase their proportion of ownership or control of a New Zealand company where the overseas person already had 25 percent or more ownership of control and the consideration for the acquisition of the extra securities or the value of the New Zealand company’s and any subsidiaries assets or the value of the extra securities exceeds $50 million; and
  • Acquire property used in carrying on a business where the cost of the acquisition exceeds $50 million.

it is possible to obtain a blanket transaction clearance. There are two types of blanket transaction clearance exemptions possible, one relating to portfolio investors and the other to certain companies which are New Zealand owned and controlled even though they have more than 25 percent overseas ownership.

Land transactions

For land investments an overseas person must obtain consent under the Regulations to:

  • Acquire any land or any estate or interest in land regardless of the land’s value.
  • Acquire securities in any person that owns or controls any land or any estate or interest in land, regardless of the dollar value involved, that will result in:
    • the land owning person becoming an overseas person;
    • the overseas person acquiring 25 percent or more of the ownership or control of the owning person or increase their ownership or control if the overseas person already has 25 percent or more ownership or control.

Land is defined as:

Land over 5 hectares
Any land that, together with any associated land exceeds 5 hectares in area.
Any land that or that forms part of an island other than listed exceptions orany land that, together with any associated land, exceeds 0.4 hectares in area and forms part of a number of specified islands.
Foreshore, lakes and reserves
Any land together with any associated land, exceeding 0.4 hectares in area and that includes or adjoins the foreshore or any lake (where the lake bed exceeds 8 hectares in area) or any land that exceeds 0.4 hectares in area and is provided as a reserve, held for conservation purposes or deemed a heritage or historic area.
Other land
Any land, other then the land specified above. If the consideration for the “unimproved” land exceeds $10 million.

It is possible to obtain a blanket transaction clearance. There are two types of blanket transaction clearance exemptions possible, one relating to portfolio investors and the other to certain companies which are New Zealand owned and controlled even though they have more than 25 percent overseas ownership.

Overseas persons

Central to the application of the Overseas Investment Regulations is the definition of an “overseas person”. Overseas persons include:

  • any individual who is not a New Zealand citizen and who is not ordinarily resident in New Zealand
  • any company or body corporate that is incorporated overseas
  • any New Zealand company with 25 percent or more of its specified securities or voting power held by overseas persons
  • a trust where 25 percent or more
    • of the trustees are overseas persons
    • of the persons having power or control
    • of the trustees are overseas persons
  • of the trust property is held for the benefit of overseas persons
  • a partnership or joint venture where 25 percent or more of the partners or members are overseas persons or where overseas persons control 25 percent or more of the voting power
  • a unit trust where the manager or trustee is an overseas person or where overseas persons hold 25 percent or more of the beneficial interests
  • any other entity owned or controlled more than 25 percent by an overseas person.

Consent criteria

The Overseas Investment Act establishes the criteria for assessing applications for foreign investment in New Zealand. These criteria do not determine the commercial viability of an investment – this assessment is left to the individual investor. The Overseas Investment Act recognises that foreign investment benefits the New Zealand economy. Accordingly, the investment criteria are designed to encourage foreign investment.

General criteria – overseas investor test

The first criterion relates to the suitability of the investor. Investment applications will be granted if either the Ministers and/or the Commission are satisfied that the overseas person fulfils the following criteria:

  • the overseas person has business experience and acumen relevant to the investment
  • the overseas person has demonstrated a financial commitment to the investment
  • where the overseas person has a minimum 25 percent beneficial interest in the overseas investment, the overseas person is of good character and is eligible for a residence permit or a temporary permit under the Immigration Act 1987
  • the overseas investment would be in New Zealand’s national interest.

Land investments – national interest test

The second criterion relates to a national interest test which applies to land investments only. Before an investment application may be approved, either the Ministers and/or the Overseas Investment Commission must be satisfied that a proposed land purchase is in New Zealand’s national interest. A range of criteria exists in relation to this national interest test.


New Zealand’s tax system

The majority of tax revenue in New Zealand comes from income tax and a goods and services tax.

The major tax regimes which are relevant to investment in New Zealand are:

  • Income tax
  • Goods and services tax (GST)
Income Tax

Liability for income tax

Residents of New Zealand are liable to New Zealand income tax on their worldwide income. Non-residents of New Zealand are liable to income tax on any income derived from a New Zealand source. Income derived by a non-resident from a source outside New Zealand is not subject to income tax in New Zealand.

The top income tax rate for the 2000/2001 (and subsequent) income years for individuals is:

  • On income upto $38,000 – 19.5%.
  • On income between $38,000 – $60,000 – 33%.
  • On income over $60,000 – 39%.

The Tax rate for companies is 33%

Tax residency of individuals

An individual is resident in New Zealand for tax purposes if she or he is personally present in New Zealand for more than 183 days within any 12 month period, or if that person has a “permanent place of abode” in New Zealand (whether or not that person also maintains a permanent place of abode overseas). The permanent place of abode test is somewhat nebulous and overrides the day-count test.

Tax residency of companies

A company is deemed to be a New Zealand resident for taxation purposes if:

  • the company is incorporated in New Zealand
  • the company’s head office is in New Zealand
  • the company’s centre of management is in New Zealand, or
  • the company’s directors exercise control of the company in New Zealand (whether or not some decisions are made overseas).

Any body corporate or other legal entity which has a legal personality separate from that of its members is treated as a company, as are unit trusts and certain group investment funds.

Double tax agreements

Where a taxpayer has tax liabilities arising in more than one jurisdiction, New Zealand’s network of double tax agreements may operate to ameliorate double taxation, and resolve dual residency issues.

Employee tax payments

Tax payable by employees on employment income is deducted at source by the employer in a system known as “pay as you earn” (“PAYE”). PAYE is deducted when the employee is paid. Legislative reforms have removed the need for most employees paying PAYE to file a tax return. However, certain individuals are still required to file a return such as non-residents, provisional taxpayers and recipients of withholding payments.

Fringe benefit tax

Fringe benefits are certain non-cash entitlements provided by an employer, such as the private use of motor vehicles and telephones. Fringe benefit tax is usually an allowable deduction against the employer’s gross income. Taxing the employer rather than the employee is intended to encourage a shift to remuneration being paid in cash rather than in kind.

Capital gains tax

New Zealand does not have a separate capital gains tax regime. However, in limited circumstances, income tax may be imposed on any amount derived from the sale or other disposition of capital assets, including real and personal property. If an asset is acquired by a person who deals in those assets, or for the purpose of resale, or as part of an undertaking or scheme entered into for a profit-making purpose, any amount derived on the sale of that asset may be subject to income tax at normal rates. The accrual rules make all gains on financial arrangements (generally, debt securities) assessable.

Accruals regime

New Zealand has a timing regime, which operates to recognise income and expenditure on financial arrangements on an accrual rather than a cash/receipts basis. Under the accrual rules a receipt is treated as derived when it becomes due, as opposed to receipts accounted for on a cash basis which are treated as derived when received. The accrual rules are generally intended to spread income and expenditure on a yield to maturity basis over the term of a financial arrangement in a symmetrical manner as between the various parties to the arrangement.

Imputation credits

New Zealand has a full imputation system. Resident companies may attach imputation credits to dividends paid to shareholders. The credits represent income tax that has been paid by the company on its profits. The credits can be used by shareholders to offset any tax payable in respect of their taxable income. There are continuity rules which affect the ability of a company to carry forward its imputation credits.

Imputation credits are not available to non-residents. However, under the foreign investor tax credit (FITC) regime, a resident company paying a dividend to a non-resident shareholder can receive a tax credit for the amount of imputation credits attached to the dividend. This tax credit can be passed to the non-resident shareholder as a “supplementary dividend”. To the extent that the dividend is fully imputed, the supplementary dividend offsets the non-resident withholding tax liability (discussed below) in respect of that dividend.

Resident withholding tax

Interest and dividends paid to residents (including non-residents with permanent establishments in New Zealand) are subject to resident withholding tax. For dividends the rate is 33 percent gross. For interest, if the taxpayer so elects, the rate is reduced if the payer is given the IRD number of the recipient. A 39% non-declaration rate applies when a taxpayers IRD number is not supplied and no deduction rate has been elected. Exemption certificates are available for banks, financial intermediaries and large taxpayers. The exemption applies to interest and dividends paid to holders of certificates.

Non-resident withholding tax

Non-residents deriving fully imputed dividends from New Zealand are subject to non-resident withholding tax (“NRWT”) of 15 percent. Where the dividend is not fully imputed the rate is increased to 30 percent, which may be reduced to 15 percent where a double tax treaty applies. Where dividends are fully imputed the non-resident withholding tax deduction may be offset by a supplementary dividend paid under the FITC regime described above.

Non-residents deriving royalties or interest from New Zealand will be subject to NRWT at a rate of 15 percent, which may be reduced to 10 percent where a double tax treaty applies. Non-resident withholding tax on interest may be reduced to 0 percent if the “approved issuer levy” is paid.

Thin capitalisation rules

Thin capitalisation rules, aimed at ensuring that New Zealand entities do not deduct disproportionately high amounts of their worldwide group’s interest payments, apply in New Zealand. The rules apply to all New Zealand resident entities controlled by a single non-resident. To the extent that a New Zealand entity’s “group debt percentage” exceeds the specified thresholds the entity will be disallowed a deduction for any interest payments.

Transfer pricing

New Zealand has comprehensive transfer pricing rules. The rules apply to all cross-border transactions involving the supply and acquisition of goods, services, money, other intangible property, or anything else, between associated persons. All cross-border transactions between associated persons must take place at “arm’s-length” prices and according to an accepted pricing methodology.

Goods and services tax

Goods and services tax (“GST”) is a broadly based consumption tax levied at 12.5 percent on the supply of most goods and services in New Zealand. Any person who within a 12 month period makes total supplies in New Zealand in excess of $40,000 in the course of all “taxable activities” is liable to be registered for GST. Registered persons must generally file a GST return once every two months. Some supplies are taxed at the rate of zero per cent. A person registered for GST who makes supplies (including zero-rated supplies) can claim an input tax credit. Other specified supplies are exempt from GST.


The above commentary is intended to provide an outline of a selection of key aspects of New Zealand law which a potential investor in New Zealand will need to consider. The above is not a complete description of all relevant legislation. Whilst the summaries above are believed to be correct, no liability can be accepted for any inaccuracies or omissions. Readers should not act or rely on this general information without first seeking specific professional advice on the detailed aspects of the laws of New Zealand.

For more information please contact Buddle Findlay or visit our website at

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