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. To view this Portfolio, visit Bloomberg Tax for
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Tax Management Portfolio, Business Operations in New Zealand, No. 7270, 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. It 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. The Worksheets also include 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. A complete list is shown in the Table of Worksheets.
This Portfolio may be cited as Patterson, 7270 T.M., Business Operations in New Zealand.
David Patterson, B.C.A., LL.B. (Hons), LL.M. (Harvard), Partner, Chapman Tripp, Barristers and Solicitors engaged in commercial and taxation practice.
Table of Contents
Detailed Analysis I. New Zealand — The Country, Its People and Economy A. Geographical and Demographic Features B. Political Organization C. New Zealand's Legal System 1. Statute Law 2. Court System D. Economic Structure II. Operating a Business in New Zealand Introductory Material A. Foreign Investment Regulation 1. General 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 a Land Transaction g. Penalties h. Ongoing Monitoring B. Currency and Exchange Controls C. Trade and Commerce Regulation 1. Imports and Exports a. Licenses and Quotas b. Customs Duties and Other Taxes c. Documentation 2. General Regulation of Business a. Monopolies b. Mergers c. Restrictive Trade Practices d. Price Controls e. Fair Trading f. Securities Regulation 3. Licensing and Franchising in New Zealand a. Patents b. Trademarks, Trade Names, and Designs c. Industrial Know-how d. Copyrights 4. Sale of Goods and Consumer Protection a. Implied Terms b. Credit Contracts, Hire Purchase Contracts c. Safety and Standards d. Consumer Guarantees Act 1993 5. Privacy D. Immigration Regulations E. Labor Relations 1. Good Faith 2. Consultation 3. Sale of Business/Contracting Out 4. Dispute Resolution 5. Strikes and Lockouts 6. Union Access 7. Equal Opportunities 8. Minimum Working Conditions a. Wages b. Holidays and Leave c. Parental Leave 9. KiwiSaver 10. Accident Compensation and Health and Safety F. Financing the Business G. Anti-Money Laundering and Countering Financing of Terrorism Act 2009 1. Verification of the Identity of Certain Persons 2. Reporting of Suspicious Activities 3. Need to Retain Records 4. Obligation to Report Imports and Exports of Cash 5. Recent Changes III. Forms of Doing Business in New Zealand A. Principal Business Entities 1. Sole Proprietorship 2. Company 3. Partnership a. General Partnership b. Limited Partnership 4. Foreign Companies 5. Other Entities B. Companies 1. Formation a. Purpose Clause b. Corporate Name c. Incorporators d. Articles of Incorporation e. Share Capital f. Incorporation Procedure g. Costs of Incorporation h. Shareholders i. Directors j. Pre-Incorporation Contracts 2. Operation a. License b. Amendment of Articles c. Increases and Reductions of Capital Stock (1) Issuing New Shares (2) Share Subdivisions (3) Share Consolidations d. Acquisition of Own Shares e. Corporate Officers f. Shareholders' Meetings g. Directors' Meetings h. Books and Records i. Financial Statements (1) Financial Reporting Act 2013 (2) Financial Markets Conduct Act 2013 j. Dividends and Other Distributions of Profits 3. Amalgamations 4. Takeovers a. Shareholder Approval b. Full Offer c. Partial Offer d. Creeping Acquisitions e. Compulsory Acquisitions f. Exemptions g. Offers (1) Period and Conditions (2) Consideration (3) Variations h. Defensive Tactics i. Acquisitions During Offer Period j. Takeover Offer Procedure k. Misleading or Deceptive Conduct 5. Dissolution 6. Liquidation 7. Reorganization (“Voluntary Administration”) C. Partnership 1. General Partnership a. Formation b. Administration c. Accounting d. Dissolution 2. Limited Partnership a. Formation b. Role of General and Limited Partners c. Safe Harbors d. Administration e. Dissolution D. Branch of a Foreign Corporation (“Overseas Companies”) 1. Registration 2. Liability 3. Books and Records E. Other Business Entities 1. Joint Ventures 2. Trusts 3. Unit Trusts 4. Incorporated Societies F. Transfer of Registration Under the Companies Act IV. Principal Taxes A. Sources of Authority in Tax 1. Legislative a. Organization of the Tax Law (1) ITA (2) GST Act (3) TAA b. Other Legislative Documents that Can Be Used to Interpret the Law (1) Regulations (2) Interpretation Act 1999 c. Legislative Process d. Constitutional Challenge 2. Administrative a. Determinations b. Interpretation Guidelines and Interpretation Statements c. Operational Statements d. Binding Rulings e. Standard Practice Statements f. Questions We've Been Asked g. Revenue Alerts h. CIR's Statements i. Operational Positions 3. Courts B. Income Tax C. Estate and Gift Tax D. Goods and Services Tax E. Capital Investment Tax F. Payroll Tax G. Trade Tax H. Net Worth Tax I. Local Taxes J. Other 1. Accident Rehabilitation and Compensation Levies 2. Insurance Premium Tax 3. Gambling Taxes V. Taxation of Domestic Corporations A. What Is a Domestic Corporation B. Corporate Income Tax 1. Taxation of Worldwide Income 2. Accounting a. Accounting Periods b. Accounting Methods c. Inventories d. Reserves 3. Calculation of Gross Income a. General b. Capital Gains c. Dividend Income d. Income from Foreign Sources (1) General (2) CFC and FIF Regimes (a) Introduction (b) CFCs (c) FIFs (i) Fair Dividend Rate Method (ii) Cost Method (iii) Comparative Value Method (iv) Deemed Rate of Return Method (v) Attributable FIF Income Method e. Stock Options f. Other Inclusions in Gross Income (1) Financial Arrangement Income (2) Portfolio Investment Entity (PIE) Income (3) Royalty Income g. Exclusions from Gross Income 4. Business Expenses a. General b. Organizational Expenses c. Travel and Entertainment Expenses d. Interest and Royalties (1) Deductibility of Interest (2) Thin Capitalization Regime (a) Thin Capitalization Regime as It Applies to Entities Other than New Zealand Registered Banks and Their Banking Groups (b) Thin Capitalization Regime as It Applies to New Zealand Registered Banks and Their Banking Groups (3) Deductibility of Royalties e. Taxes f. Depreciation and Amortization g. Obsolete Equipment h. Charitable Contributions i. Capital Losses j. Casualty Losses k. Reserve Accounts l. Bad Debts m. Inventory Write-downs n. Rents o. Salaries and Wages p. Other Deductions from Gross Income (1) Emissions Units (2) Payments Under a Restrictive Covenant (3) Black Hole Expenditure (4) Employer's Superannuation Contribution 5. Capital Expenditures 6. Loss Carryovers, Carrybacks, and Grouping a. Carrying Losses Forward b. Grouping of Losses 7. Tax Credits a. Foreign Tax Credit b. R&D Tax Credit c. Imputation Credits (1) Imputation Credit Accounts (2) Trans-Tasman Imputation Regime 8. Tax Rates and Calculation of Taxable Income a. Corporate Tax Rate b. Calculation 9. Assessment and Filing a. Non-active Companies b. Payment of Tax 10. Audit Process and Statute of Limitations for Assessment and Collection of Taxes a. Disputes Resolution b. Challenges Procedure (1) Evidence Exclusion Rule (2) Payment of Tax in Dispute (3) Appeals c. Penalties (1) Civil Penalties (2) Promoter Penalties (3) Criminal Penalties d. Interest 11. Consolidated Returns 12. Reorganizations a. Change of Legal Form b. Mergers, Spin-offs, etc. (1) Mergers (“Amalgamations”) (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) Provisional Tax (2) Spin-offs c. Cross-Border Transactions d. Liquidation 13. Advance Rulings C. Other Taxes 1. Dividend Tax a. Resident Withholding Tax (1) Cash Dividends (2) Non-cash Dividends (a) Other than Bonus Issues in Lieu and Shares Issued Under a Profit Distribution Plan (b) Bonus Issues in Lieu and Shares Issued Under a Profit Distribution Plan b. Nonresident Withholding Tax 2. Capital Investment Tax 3. Goods and Services Tax (GST) a. Registration b. Goods and Services Defined c. Supplies (1) Taxable Supplies (a) General (b) Supplies in New Zealand (c) Reverse Charge (d) Deemed Supplies (e) Imports (f) “Remote” Services (2) Exempt Supplies (3) Zero-Rated Supplies (a) General (b) Land (c) Exports (d) Supply of a Taxable Activity as a Going Concern (e) Financial Services d. Time of Supply (1) General Rule (2) Associated Persons (3) Hire Agreements and Periodic Payments (4) Hire Purchase Agreements (5) Progress Payments e. Value of Supply f. Input Tax g. Returns and Assessments of GST (1) Accounting Basis (2) GST Returns (3) Calculation and Payment of GST (4) Assessments and Challenges 4. Trade Tax 5. Real Estate Tax 6. Local Taxes 7. Other Taxes a. Pay As You Earn (PAYE) b. Fringe Benefit Tax (FBT) c. Employer's Superannuation Contribution Tax (ESCT) VI. Taxation of Foreign Corporations A. What is a Foreign Corporation B. Determination of Taxable Income C. Method of Taxation 1. Investment Income and Passive Payments a. Dividend Income b. Dividend Payments c. Interest Income d. Interest Payments e. Royalty Income f. Royalty Payments 2. Business Income D. Goods and Services Tax (GST) E. Assessment and Filing VII. Taxation of a Branch A. Determination of Taxable Income B. Method of Taxation C. Subsidiary v. Branch VIII. Taxation of Partnerships A. General Partnerships B. Limited Partnerships IX. Taxation of Other Business Entities A. Trusts 1. Trustee Income Versus Beneficiary Income 2. Trust Distributions a. Complying Trusts b. Foreign Trusts c. Non-complying Trusts B. Superannuation and KiwiSaver Schemes C. Unit Trusts D. Mutual Associations E. Portfolio Investment Entities 1. Principal Components of the PIE Regime 2. PIE Eligibility Requirements a. Entity Requirements b. Investment-in Requirements c. Investment-out Requirements 3. Tax Treatments of Different Types of PIEs and Their Investors a. Listed PIEs b. Life Fund PIEs c. Benefit Fund PIEs d. Multi-Rate PIEs e. Foreign Investment Portfolio Investment Entity (1) Foreign Investment Zero-Rate PIE (2) Foreign Investment Variable-Rate PIE F. Look Through Companies (LTCs) G. Life Insurers 1. Former Regime 2. Current Regime H. Mining and Petroleum Mining Companies 1. Mining Companies (Other than Petroleum Miners) 2. Petroleum Mining Companies X. Taxation of Individuals — Residents A. Scope of Taxation B. Residence C. Determination of Gross Income 1. Taxation on a Worldwide Basis 2. Foreign Superannuation Regime a. Circumstances Where the FIF Regime Continues to Apply to an Interest in a Foreign Superannuation Scheme After April 1, 2014 b. Nontaxable Lump Sum Withdrawals and Transfers (1) Withdrawals and Transfers from Australian Superannuation Schemes (2) Transfers Between Two Non-Australian Foreign Superannuation Schemes (3) Certain Transfers Following the Death of a Spouse or a Relationship Cessation (4) 48-Month Exemption Period c. Methods for Taxing Lump Sums (1) Schedule Method (2) Formula Method d. Optional KiwiSaver Withdrawal Facility D. Allowable Allowances, Deductions and Credits 1. Distinction Between Employees and Independent Contractors 2. Deduction for Mixed-Use Assets 3. Tax Credits a. Charitable Donations b. Imputation Credits and Resident Withholding Tax Credits on Interest and Dividends c. Working for Families Tax Credits d. Independent Earners E. Rates and Calculation of Taxable Income F. PAYE G. Fringe Benefit Tax (FBT) H. KiwiSaver and Superannuation I. Assessments and Filing J. Audit Process and Statute of Limitations for Assessment and Collection of Taxes XI. Taxation of Nonresident Aliens A. General B. Business Income C. Investment Income 1. In General 2. Exemption for Venture Capital Investment D. Capital Gains E. Method of Taxation 1. In General 2. Payments to Nonresident Contractors XII. Estate/inheritance/transfer and Gift Tax XIII. Tax Avoidance Introductory Material A. Income Tax 1. General Anti-Avoidance Rule 2. Specific Anti-Avoidance Provisions 3. Hybrid and Branch Mismatch Rules B. Goods and Services Tax (GST) XIV. Intercompany Pricing Introductory Material A. Adjustment of Intercompany Prices 1. Scope of the Provisions 2. Determination of Arm's-Length Price B. Documentation Requirements C. Availability of Advance Pricing Agreements or Rulings on Pricing D. Competent Authority XV. Special Provisions Relating to Multinational Corporations XVI. Avoidance of Double Taxation A. Foreign Tax Credits B. Tax Treaties 1. General 2. Tax Treaty Negotiation and Ratification Process C. Procedure to Claim Reduced or No Withholding, or Refund D. Taxation of Business Income 1. Permanent Establishment 2. Industrial or Commercial Profits 3. Planning to Minimize Taxation of Business Income Under the Treaty E. Taxation of Investment Income 1. What Is Investment Income 2. Withholding Rates F. Income Tax Treaty with the United States G. Estate and Gift Tax Treaty H. New Zealand-U.S. Inter-Governmental Agreement to Improve International Tax Compliance and to Implement FATCA (“New Zealand-U.S. IGA”) I. Implementation of Automatic Exchange of Information (AEOI) J. Multilateral Instrument
Table of Worksheets Worksheet 1 How to Make a Land Application Under the Overseas Investment Act 2005 Worksheet 2 Table of Fees to Be Paid for a Land Application Under the Overseas Investment Act 2005 Worksheet 3 Incorporation of a New Zealand Company Under the Companies Act 1993 Worksheet 4 Overseas Company Registration as a Branch in New Zealand Under the Companies Act 1993 Worksheet 5 Operational Obligations of Companies Incorporated Under the Companies Act 1993 Worksheet 6 Table of Fees and Annual Return Fees to Be Paid to the Registrar of Companies and Registrar of Financial Service Providers Worksheet 7 IR 265 — General Depreciation Rates Worksheet 8 Selected List of Forms and Publications Available from New Zealand Inland Revenue Web Site Introduction Worksheet 9 New Zealand-United States Income Tax Treaty (as reproduced in Schedule 1 of the Double Taxation Relief (United States of America) Order 1983) Worksheet 10 New Zealand-United Kingdom Income Tax Treaty (as reproduced in Schedules 1, 2 and 3 of the Double Taxation Relief (United Kingdom) Order 1984) Worksheet 11 List of Countries with Which New Zealand Has In Force Income Tax Treaties and Other Tax-Related Agreements as of March 31, 2018 Worksheet 12 [Reserved.] Worksheet 13 Calculation of Assessable Income for Taxpayers Other than Non-Filing Taxpayers
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