Business Operations in New Zealand (Portfolio 975)

Tax Management Portfolio, Business Operations in New Zealand, contains the basic information that will enable a foreign business to determine the best method of conducting its operations in New Zealand from both the tax and the general legal points of view.

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This Portfolio analyzes in detail New Zealand income taxation as applied to individuals and corporations. This analysis also includes considerations concerning the establishment of a business entity in New Zealand and operations through a branch office as compared with a subsidiary. In addition to a detailed explanation of the New Zealand system of income taxation, the Portfolio discusses New Zealand company law, tax treaties, and indirect taxation.

The Worksheets in the Portfolio provide various checklists, including a guide to making an application under the Overseas Investments Act 2005, and lists of incorporation procedures under the Companies Act of 1993, with further guidelines included concerning the operational obligations of companies, and branch registration; a selected list of tax forms and guides (available from the Inland Revenue Web site) for corporations, partnerships, estates and trusts, and include forms for the PAYE and Fringe Benefit Tax regimes, in addition to various withholding forms; New Zealand's tax treaties with the United States and the United Kingdom are also provided.


Business Operations in New Zealand was authored by the following experts.
Casey M.V. Plunket

Casey M.V. Plunket, B.C.A., LL.B. (Hons), LL.M. (Mich.), Partner, Chapman Tripp, Barristers and Solicitors engaged in commercial and taxation practice.

Table of Contents

Detailed Analysis

I. New Zealand - An Overview

A. New Zealand - Geographical, Demographic, Political, and Economic Features

1. Geographical and Demographic Features

2. Political Organization

3. Economic Structure

B. New Zealand's Legal System

1. Statute Law

2. Court System

II. Operating a Business in New Zealand

A. Foreign Investment Regulation

1. New Zealand's Investment Climate

2. Overseas Investment Office

a. Business Transactions Not Involving Land

b. Business Transactions Involving Sensitive Land

(1) What Is Sensitive Land?

(2) Associated Land

(3) Special Land

(4) Farm Land

c. Exemptions from Compliance

d. Other Exemptions

e. Consent Criteria

f. Matters Considered in Land Transactions

g. Penalties

h. Ongoing Monitoring

B. Trade and Commerce Regulation

1. Imports and Exports

a. Import Licensing

b. Customs Duties

c. Australia New Zealand Closer Economic Relations Trade Agreement

2. The Commerce Act 1986

a. Monopolies, Mergers, and Franchising

(1) Restrictive Trade Practices

(2) Mergers/Acquisitions

(3) Franchising

b. Price Controls

c. Powers of Commerce Commission

d. Fair Trading

3. Corporate Financing

a. Common Methods

b. The Personal Property Securities Act 1999

c. Securities Act 1978

d. New Zealand Exchange

4. Takeovers

a. Shareholder Approval

b. Full Offer

c. Partial Offer

d. Creeping Acquisitions

e. Compulsory Acquisition

f. Exemptions

g. Offers

(1) Period and Conditions

(2) Consideration

(3) Variations

h. Defensive Tactics

i. Takeover Offer Procedure

5. Land Use

a. Land Transfer System

b. Overseas Ownership of Land

c. Resources Management and Environmental Protection

d. Mining and Mineral Ownership

6. Banking and Insurance

a. Banking System

b. Restrictions on Insurance Business

7. Intellectual Property

a. Patents, Trademarks, and Designs

b. Know-How

c. Copyright

d. Business Names

8. Sale of Goods and Consumer Protection

a. Implied Terms

b. Credit Contracts, Hire Purchase Contracts

c. Safety and Standards

d. Consumer Guarantees Act

9. Privacy

10. Financial Transactions Reporting Act 1996

a. Verification of the Identity of Certain Persons

b. Reporting of Suspicious Transactions

c. Need to Retain Records

d. Obligation to Report Imports and Exports of Cash

11. Investment Advisers (Disclosure) Act 1996

a. Mandatory Disclosure

b. Request Disclosure

C. Labor Regulation

1. Immigration

2. Employment Agreements

3. Health and Safety

D. Documents

1. Contract or Deed?

2. Execution of Documents Overseas for Use in New Zealand

a. Efficacy

b. Admissibility

III. Forms of Doing Business in New Zealand

A. Introduction

1. Companies

2. Partnerships

a. General Partnership

b. Special Partnership

c. Limited Partnership

3. Joint Ventures

B. Companies

1. Incorporation

a. Application for Registration

b. Name

c. Issue of Shares

d. Constitution

e. Shareholders

f. Directors

g. Auditor

h. Pre-Incorporation Contracts

2. Operations

a. Shareholders' Meetings

b. Directors' Meetings

c. Alterations to Constitution

d. Annual Accounts and Returns

e. Financial Reporting Act 1993

3. Overseas Companies

4. Takeovers

5. Dissolution

6. Transfer of Registration Under 1993 Act

C. Partnerships

1. Existence

2. Partnership Rules

3. Accounting

4. Dissolution, Retirement, Expulsion

D. Limited Partnerships

1. General Principles

2. Capital Contributions, Partnership Interest and Distributions

3. Roles of General and Limited Partners

4. Safe Harbors

5. Dissolution

IV. Principal Taxes

A. Income Tax

1. Non-filing Taxpayers

2. Taxpayers Other Than Non-filing Taxpayers

3. Taxpayers with Schedular Gross Income

B. Goods and Services Tax

C. Fringe Benefit Tax

D. Land Tax

E. Gift Duty

F. Estate Duty

G. Stamp, Check, and Credit Card Duties

1. Stamp Duty

2. Check and Credit Card Duties

H. Accident Rehabilitation and Compensation Levies

I. Rates

J. Specified Superannuation Fund Withdrawal Tax

K. Other Taxes, Duties, Levies, and Fees

1. Insurance Premium Tax

2. Gambling Taxes

3. Customs Duty

4. Excise Duties

5. Registration Fees

V. Taxation of Resident Corporations

A. Corporate Residence

B. Corporate Income Tax

1. Source and Residence Rules

2. Corporate Accounting

a. Accounting Period

b. Accounting Methods

c. Record Keeping

d. Returns of Income

e. Audit

f. Payment of Tax

(1) Corporate Tax Rates

(2) Provisional Tax

(3) Terminal Tax

3. Income

a. General

b. The Distinction Between Capital and Income

c. Interest

d. Dividends

e. Royalty Income

f. Accrual Income

g. Exempt Income

4. Deductions for Expenses

a. General

b. Add Back of Unexpired Accrual Expenditure

c. Bad Debts

d. Capital Losses

e. Casualty Losses

f. Charitable Contributions

g. Depreciation

h. Entertainment Expenses

i. Interest

j. Transfers of Trading Stock for Inadequate Consideration

k. Sale of Trading Stock with Assets

l. Distribution of Trading Stock to Shareholders

m. Offshore Expenses

n. Organizational Expenses

o. Rent, Financial Leases, and Hire Purchase Payments

p. Royalties

q. Salary and Wages

r. Payments under Restrictive Covenant

s. Research and Development Expenditure

t. Taxes

u. Travel Expenses

v. Transfer Pricing Regime

w. Thin Capitalization Regime

(1) Thin Capitalization Regime as it Applies to Entities Other than New Zealand Registered Banks and their Banking Groups

(2) Thin Capitalization Regime as it Applies to New Zealand Resident Banks and their Banking Groups

x. Deferred Deduction Rule

y. Emission Units

5. Trading Stock and Calculation of Taxable Income

6. Losses

a. Carrying Losses Forward

b. Grouping of Losses

7. Dividends

a. The Imputation Regime

b. Imputation Credit Accounts

c. Trans-Tasman Imputation Regime

8. Research and Development Tax Credit

C. Taxation of Specific Companies

1. Qualifying Companies

2. Mining and Petroleum Mining Companies

a. Mining Companies (Other than Petroleum Miners)

b. Petroleum Mining Companies

3. Insurance Companies

a. Fire and General Insurance Companies

b. Life Insurance Companies

D. Companies under Consolidation Regime

1. Introduction

2. Eligibility

3. Entry and Exit from Consolidated Groups

4. Effects of Consolidation

E. Company Amalgamation

1. Company Law Position

2. Qualifying Amalgamations

3. Special Amalgamation Provisions

a. Tax Obligations

b. Available Subscribed Capital and Shares

c. Transfers of Property

d. Deductions and Income

e. Financial Arrangements

f. Tax Losses and Credits

g. Other Provisions

VI. Taxation of Partnerships

A. General Partnerships

B. Special Partnerships

VII. Taxation of Other Business Entities

A. Trusts

1. Taxation of Trust Income - "Trustee Income" and "Beneficiary Income"

2. Trust Distributions

a. Qualifying Trusts

b. Nonqualifying Trusts

c. Foreign Trusts

B. Superannuation Schemes

1. Taxation of Registered Superannuation Schemes and KiwiSaver Schemes

2. Employee Contributions

3. Employer Contributions

4. Benefits

C. Unit Trusts

D. Mutual Associations

E. Portfolio Investment Entities (PIEs)

1. Principal Components of the Regime

2. PIE Eligibility Requirements

a. Entity Requirements

b. Investment-in Requirements

c. Investment-out Requirements

3. Tax Treatment of Different Types of PIEs and Their Investors

a. Listed Companies

b. Portfolio Investment-linked Life Funds

c. Portfolio Defined Benefit Funds

d. Portfolio Tax Rate Entities (PTREs)

VIII. Taxation of Resident Individuals

A. Scope of Taxation

B. Residence

C. Personal Tax Rates

D. Calculation of Tax Payable

E. Gross Income

F. Rebates

1. Charitable Donations

2. Other Rebates

3. Absentees

4. Rebate Statements

G. Tax Credits


2. Imputation Credits and Resident Withholding Tax Credits on Interest and Dividends

3. Family Support Tax Credits

4. Research and Development Tax Credit

5. Independent Earners

H. National Superannuation

IX. International Taxation of New Zealand Residents

A. General

B. The Controlled Foreign Company and Foreign Investment Fund Regimes

1. Introduction

2. Controlled Foreign Companies

3. Foreign Investment Funds

a. The Fair Dividend Rate (FDR) Method

b. The Cost Method

c. The Comparative Value Method

d. The Deemed Rate of Return Method

e. The Accounting Profits Method

f. The Branch Equivalent Method

C. Foreign Dividend Withholding Payments

D. Modification to Controlled Foreign Company, Foreign Investment Fund and Foreign Dividend Withholding Payment Regimes: Conduit Tax Relief Regime

X. New Zealand Taxation of Nonresidents

A. General

B. Nonresident Withholding Tax and Approved Issuer Levy

1. Approved Issuers

2. Foreign Investor Tax Credit Regime

C. Nonresident Individuals

1. Introduction

2. 92-Day Rule

3. 183-Day Rule

4. Foreign Crew Working on Pleasure Craft

5. Pay As You Earn Bonds

D. Taxation of Business Profits of Foreign Corporation

E. Payments to Nonresident Contractors - Withholding Tax

F. Exemption for Venture Capital Investment

XI. Resident Withholding Tax

A. Introduction

B. Liability to Deduct Resident Withholding Tax

1. General

2. Certificate of Exemption

3. Agents

C. Interest

D. Dividends

1. Definition of Dividends

2. Ordinary Dividends

3. Specified Dividends

4. Non-Cash Dividends

a. Other than Bonus Issues in Lieu

b. Bonus Issues in Lieu

E. Penalties

XII. Goods and Services Tax

A. Introduction

B. Registration

C. Goods and Services Defined

D. Financial Services

E. Supplies

1. Taxable Supplies

a. General

b. Supplies in New Zealand

c. Reverse Charge

d. Deemed Supplies

e. Imports

f. Supply of Goods or Services - Does Purchase Price Include Goods and Services Tax?

2. Exempt Supplies

3. Zero-Rated Supplies

a. General

b. Exports

c. Supply of Taxable Activity as Going Concern

4. Time of Supply

a. General Rule

b. Associated Persons

c. Hire Agreements and Periodic Payments

d. Hire Purchase Agreements

e. Progress Payments

5. Value of Supply

6. Input Tax

F. Returns and Assessment of Goods and Services Tax

1. Accounting Basis

2. Goods and Services Tax Returns

3. Calculation and Payment of Goods and Services Tax

G. Assessments and Challenges

XIII. Fringe Benefit Tax

XIV. Gift Duty

A. Dutiable Gifts

B. Exemptions

C. Relief from Gift Duty

D. Gift Statements

E. Payment of Gift Duty

XV. Tax Avoidance

A. Income Tax

1. General Tax Avoidance Provision

2. Specific Tax Avoidance Provisions

B. Goods and Services Tax Act 1985

XVI. Elimination of Double Taxation - Income Tax

A. Foreign Tax Credits

B. Tax Treaties

1. Tax Treaties Generally

a. Existing Tax Treaties

b. Comparison of Tax Treaties

(1) Introduction

(2) Permanent Establishment

(3) Business Profits

(4) Interest

(5) Dividends

(6) Royalties

2. New Zealand-United States Treaty

a. General

b. Residence

c. Permanent Establishment

d. Business Profits

e. Dividends

f. Interest

g. Royalties

h. Relief from Double Taxation

i. Mutual Agreement Procedure

XVII. Tax Administration

A. Record Keeping

B. Returns

C. Assessments

D. Refunds

E. Audit

F. Disputes Resolution

G. Challenges Procedure

1. Evidence Exclusion Rule

2. Payment of Tax in Dispute

3. Appeals

H. Penalties and Interest

1. Civil Penalties

2. Promoter Penalties

3. Criminal Penalties

4. Interest

I. Binding Rulings

1. General

2. Public Rulings

3. Private and Product Rulings

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 A Guide to Making an Application Under the Overseas Investment Regulations 2005

Worksheet 2 Incorporation of a New Zealand Company Under the Companies Act 1993

Worksheet 3 Overseas Company Registration as a Branch in New Zealand Under the Companies Act 1993

Worksheet 4 Operational Obligations of Companies Incorporated Under the Companies Act 1993

Worksheet 5 Table of Fees and Annual Return Fees to be Paid to the Registrar of Companies

Worksheet 6 Schedule of Depreciation Rates and Determination DEP1: Tax Depreciation Rates, General Determination Number 1

Worksheet 6A General Depreciation Determination DEP54

Worksheet 7 IR 4 - Income Tax Return for Companies

Worksheet 8 IR 6 - Income Tax Return for Estates and Trusts

Worksheet 9 IR 6B - Estate/Trust Beneficiary Details

Worksheet 10 IR 7 - Return for Partnerships

Worksheet 11 GST 101 - Goods and Services Tax Return

Worksheet 12 IR 420 - Fringe Benefit Tax Quarterly Return

Worksheet 13 IR 427 - FBT Taxable Value Calculation Sheets

Worksheet 14 IR 345 - Pay-in Slip for PAYE Tax Deductions

Worksheet 15 IR 348 - Employer Monthly Schedule

Worksheet 16 IR 451 - Application for Exemption from Resident Withholding Tax

Worksheet 17 IR 15S - Resident Withholding Tax Reconciliation Statement for Interest

Worksheet 18 IR 67P - Pay-in Slip for Non–Resident Withholding Tax (NRWT)

Worksheet 19 IR 67 - Non-Resident Withholding Tax Deduction Certificate

Worksheet 20 IR 67S - Non-Resident Withholding Tax Reconciliation Statements

Worksheet 21 IR 291 - Non-Resident Withholding Tax Payer's Guide; IR 67SG - Non-Resident Withholding Tax Reconciliation Statement Guide

Worksheet 22 IR 397 - Application to Register Security; IR 395 - Approved Issuer Levy: A Guide for Payers

Worksheet 23 IR 4F - Pay-in Slip for Foreign Dividend Withholding Payments

Worksheet 24 IR 477 - Interest in a Foreign Company Disclosure Schedule

Worksheet 25 IR 796 - Adjustment Request

Worksheet 26 IR 713 - Application for Private Ruling

Worksheet 27 IR 714 - Application for Product Ruling

Worksheet 27A Form IR 488 - Trans-Tasman Imputation Election

Worksheet 28 1982 New Zealand-United States Income Tax Treaty

Worksheet 29 1983 New Zealand-United Kingdom Income Tax Treaty

Worksheet 30 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by New Zealand as of December 1, 2008

Worksheet 31 Table of Important Article Numbers in New Zealand's Double Taxation Agreement

Worksheet 32 Calculation of Taxable Income for Taxpayers Other than Non-filing Taxpayers

Worksheet 33 Conversion Table: Income Tax Act 1994 References Converted to Income Tax Act 2004 References





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