Jurisdiction of the month: New Zealand

2016 10 03 | Category: News

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New Zealand lies in the South Pacific Ocean and consists of two main islands (called the North and South Islands) and a number of smaller islands. The land area is 268,680 km2. Additionally, New Zealand has extensive marine resources, including the Exclusive Economic Zone, covering over 4 million km2.

New Zealand is easily accessed by air travel and has the time zone advantage of same day access to Asia and parts of America. The capital of New Zealand is Wellington, and the largest city is Auckland. The population of New Zealand numbers 4.2 million. About 70% of the population is of European ancestry (mostly British, Irish and Dutch).

Official languages are English, Maori, and New Zealand Sign Language.

History, Political Structure and Law

Settlers from Polynesia arrived to New Zealand some time between the 13th and the 15th century, and founded the Maori culture. The first European led by Abel Janszoon Tasman reached New Zealand only in 1642. In 1769 Captain James Cook began extensive explorations of the islands, which lead to European whaling expeditions and eventually European colonisation.

In 1834, the British convened United Tribes of New Zealand to select a flag and declare their independence. However, increasing French interest in the region led the British to annex New Zealand by Royal Proclamation in January 1840. A month later the Treaty of Waitangi was signed; it is considered to be the founding document of New Zealand.

New Zealand became an independent dominion on 26 September 1907. Full independence was granted by the United Kingdom Parliament with the Statute of Westminster in 1931 and Statute’s adoption by the New Zealand Parliament in 1947. Since then New Zealand has been a sovereign constitutional monarchy with a parliamentary democracy. Under the New Zealand Royal Titles Act (1953), Queen Elizabeth II is Queen of New Zealand and is represented as head of state by the Governor-General.
The majority of the New Zealand Legislation is based on English common law. The highest court is the Supreme Court of New Zealand. New Zealand’s judiciary also includes the High Court and the Court of Appeal, as well as subordinate courts.

Economy and Infrastructure

New Zealand has a modern, developed economy and a high standard of living. The main export industries are agriculture, horticulture, fishing and forestry. Major export partners are Australia, US, Japan, China, and Germany. New Zealand takes pride in well-developed communication, business and commercial infrastructure and a high standard of professional services. The legal and banking professions are also of high level.

Granted autonomy in 1947 New Zealand has a progressive economy that is based largely upon banking and finance. Due to changing economic situation since 1984 a major macroeconomic restructuring was made leading the country to economic liberalisation. There have been several reforms, such as the removal of interest and exchange controls allowing the free flow of capital in and out of the country.

The currency is New Zealand Dollar with no exchange controls applied.

Company Incorporation

One of the major advantages of utilising New Zealand companies is that New Zealand is a full member of the Organisation for Economic Co-operation and Development (O.E.C.D) and is not considered as a harmful tax jurisdiction.

Although it is possible to register an unlimited liability company, companies are usually either limited liability companies or companies limited by guarantee. If properly structured, a New Zealand resident company can operate as a tax free offshore company.

There is great flexibility in the incorporation and management of a New Zealand Company. It has no capital requirements and has a simple and fast incorporation procedure.

Every company must have a registered office in New Zealand, where statutory registers are kept, as well as an address for service, where legal documents can be delivered to the company. Both addresses must be notified to the Registrar on application for incorporation. It has to be a physical New Zealand address. Usually it is the business address of registered agent.

Currently, two types of companies are available in New Zealand.
The first type is a company established by individuals and is called a “Look Through Company” LTC. This company is not taxed; individuals pay taxes after profit allocation. In order to register the LTC company the following requirements must be met: company founders (5 or less) must be non residents in N. Zealand, income must be derived not from N. Zealand, the company must be registered with the tax office and is obliged to provide annual financial statements. This type of company is usually used for merchant activities.

The second type of company established in New Zealand is Foreign Trust. A Foreign Trust is established to act as a trustee company for LTC to which the beneficiaries (natural persons) transfer income received by the LTC. In this case, when LTC’s asset is managed by Trust, it is exempt from taxation. Trust can invest in shares, securities, other assets, or lend such income.

Minimum number of shareholders is one and corporate shareholders are allowed. Minimum number of Directors is one; corporate directors are not allowed. If a company has only one director, he cannot also be the secretary. Both directors and shareholder may be of any nationality. If more than 25% of the shares or a majority of Directors reside outside New Zealand the company has to file annual financial accounts. A private company cannot have unissued shares. Bearer shares are not allowed.
Every company should hold an annual meeting of shareholders once every calendar year. Annual meetings may be held anywhere. A Company can obviate holding an annual general meeting, if all matters specified in the Companies Act 1993 are done by way of a resolution in writing.
The following name restrictions apply:
• Names having royal, national, international, and commercial or other significance are prohibited (Flags, Emblems and Name Protection Act 1981 or by any other enactment);
• Names that are misleading or deceptive are prohibited (The Fair Trading Act);
• Identical or almost identical names are prohibited;
• Offensive names are prohibited; the question of whether a name is offensive is entirely within the Registrar’s discretion;
• An only suffix “Limited” is allowed. After incorporation, the suffix “Ltd” can be used everywhere;
• The following abbreviations whenever they appear in a name are allowed: “&” for “and”; “no” for “number”; “co” or “coy” for “company”; “N.Z.” or “NZ” for “New Zealand”; “Bros” for “Brothers”.

Annual Taxation and Fees

A company pays tax at 33% on any profit. If the company tax paid profit is later distributed to shareholders as dividends, the individual shareholders receive a credit in their tax returns for the tax the company has already paid. Thus there is no double taxation.
A company not resident in New Zealand is liable only in respect of income derived from New Zealand. A New Zealand company is taxable on its worldwide income.

A New Zealand Company, which is structured as the Trustee of a non-resident New Zealand Trust is not taxable. If the settlor of the Trust does not reside in New Zealand during the income year, the Trust is not taxed.

New Zealand has double tax treaties with 30 countries, therefore New Zealand companies may take advantage of the low rates of non-resident withholding taxes deducted by the source country on interest, royalties and dividends ranging generally from 10-15%. However, a New Zealand Trust with a trustee resident in New Zealand should qualify as a resident of New Zealand for the purposes of a double taxation treaty.


EditorJurisdiction of the month: New Zealand