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New Zealand

Why New Zealand?

New Zealand (NZ) is an island country in the South Pacific Ocean. It consists of two main islands namely, the North and South island and a number of other small islands, New Zealand shares maritime borders with Australia, the island nations of Fiji and Tonga. The country has a developed free market economy based on agriculture and services. The island nation hugely depends on international trade and tourism however, its major exports are concentrated on milk and butter and the major imports consist of cars and crude petroleum. China, Australia, and the United States are the country’s top trading partners.

Advantages

New Zealand has topped the World Bank’s 2017 Doing Business report. Due to following reasons New Zealand is attractive and ultimately one of the best destinations in the Asia Pacific region for doing business.

A conducive economic climate

However, smaller in size than most of the other countries, New Zealand has established itself as one of the top places for investment and business incorporation due to its economic stability and potential for growth. The steady GDP growth of 3.3% in recent year shows that consumer spending has been growing steadily over the past few years and shows no signs of slowing down. This makes it an ideal place for companies looking for a huge consumer base.

Easy legal requirements

When it comes to starting a business, New Zealand offers simple procedures and minimum legal restrictions. Legal regulations may slightly defer from case to case depending on the business structure, such as a partnership, limited partnership, company, or sole trader. Moreover, the paperwork to set up a business can be completed online in a matter of hours, with much ease and convenience.

A supportive startup community

New Zealand’s startup scene seems to be able to provide with working spaces aplenty, and a friendly, tightly knit community full of like minded peers. No one will find any shortage whenever he need advice, a listening ear, or just someone to bounce ideas off with.

A forgiving tax system

It is well known that, tax is one of the inescapable realities of life. A business is liable to pay income tax on its net profit, based on the amount of goods and services it sells. This is based on the type of entity, and the income within the year.

Work life balance

Ensuring a healthy work life balance in which a person is able to block out time to recharge which boost his productivity in the long run, allowing to work more efficiently to help his ideas take off. As per HSBC Expat Explorer Survey, New Zealand ranks 6th amongst the countries of the world for work life balance, and 1st in the Asia Pacific.A recent survey revealed that Kiwis were the happiest workers in the world, with 74% reporting having a good work life balance.

Simple Tax Regime

Individual tax

A resident is liable to pay tax on worldwide income, whereas, a non resident is subject to tax only on income from sources in New Zealand. The following individual tax rates are applicable in New Zealand:

  • Income from NZD 0 TO 14,000 is liable to tax at a rate of 10.5%;
  • Income from NZD14, 000 to 48,000 is liable to tax at a rate of 17.5%;
  • Income from NZD 48,001 to 70,000 is liable to tax at a rate of 30%;
  • Income from NZD 70,001 to 180,000 is liable to tax at a rate of 33%;
  • Income from NZD 180,000 and above is liable to tax at a rate of 38%; and
  • From 1 April, 2021 any income over NZD 180,000 is taxed at a marginal rate of 39%.

Corporate tax

In New Zealand, the residents companies are liable to tax on their worldwide income, whereas, the non resident companies (including branches) are liable to tax on their New Zealand sourced income, subject to any applicable double taxation agreement. In New Zealand, the standard corporate income tax rate is 28%.

Local tax

There is no state or municipal income taxes applicable in New Zealand.

New Zealand Companies

New Zealand is a country that is enjoying stable economic conditions from a long time and is indeed a place where one should invest. Apart from its stable economy, the country has a highly regarded legal system. It offers stable, safe and reliable wealth protection. However, before starting a company, one should consider that what type of company he must start. Mainly, there are three types of companies available in New Zealand:

  1. Limited Liability Company
  2. Cooperative Company
  3. Unlimited Company

Limited Liability Company

LLC are the most common and successful business structure in New Zealand, moreover, these companies are separate entities from their owners. This means the owners are not held personally liable for any company debts or liabilities. However, a shareholder’s liability is limited to:

  • Capital investment; and
  • Personal guarantees they have given to banks and suppliers.

Cooperative Company

Sometimes Cooperative Company is called as co-ops. This companies are also limited liability companies. They provide goods and services to their members, shareholders who own and control the business. The main reasons to open a cooperative entity can be:

  • Mutual support for its members;
  • Promotion of a specific purpose; and
  • Social benefit.

All cooperative companies in New Zealand must have transacting shareholders. This means, at least 60% of shareholders must:

  • supply goods/services to the company;
  • buy its goods/services; and
  • enter into commercial transactions with the company.

Unlimited Company

As the name suggests, its shareholders have unlimited liability, which means, they have to pay off all the debts of the company that the company is unable to pay. Generally, unlimited companies are formed to carry out foreign, legal requirements.

Author: Chandrawat & Partners

Date: April 2022

Topic: Doing Business in New Zealand

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