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Starting a Business in New Zealand as a Foreigner – A Complete Guide

Are you interested in starting a business in New Zealand online? If YES, here is a complete guide to starting a business in New Zealand as a foreigner.

Okay, having provided an in-depth analysis of the top 50 best small business ideas in New Zealand and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in New Zealand. So put on your entrepreneurial hat and let’s proceed.

Why Start a Business in New Zealand?

For people wanting to start a new business, New Zealand is a smart choice. New Zealand welcomes business and investor migrants and has taken many steps to make immigration easier for experienced business people and investors. The strong economy and generally light-handed regulatory environment have lead the World Bank to describe New Zealand as “the easiest place on Earth to do business.

New Zealand is a great place for investors and entrepreneurs. The diverse geography and varied culture make for a vibrant and dynamic place to do business. Entrepreneurs” are either self employed or have a hands-on management role in a business they own (either wholly or partly).

In this category, Immigration New Zealand looks for a combination of proven business skills, a strong plan, and accessible funds to finance it. In the language of Immigration New Zealand, an “Investor” is someone with money available to put into a wide range of investment vehicles, from start-ups to bank bonds and much else besides. But ordinarily they would not be involved in the management or governance of their investment vehicles. There are two levels of investor: Investor and Investor Plus.

Starting a Business in New Zealand as a Foreigner – A Complete Guide

  • General overview

New Zealand’s modern and competitive economy benefits from a strong commitment to open-market policies that facilitate vibrant flows of trade and investment. Transparent and efficient regulations are applied evenly in most cases, encouraging dynamic entrepreneurial activity in the private sector. Financial markets, although relatively small, provide adequate access to financial resources.

  • 2016 Economic Freedom Score: 81.6 (down 0.5 point)
  • Economic Freedom Status: Free
  • Global Ranking: 3rd
  • Regional Ranking: 3rd in the Asia–Pacific Region
  • Notable Successes: Rule of Law, Open Markets, and Regulatory Efficiency
  • Concerns: Control of Government Spending
  • Overall Score Change Since 2012: –0.5

The strength of New Zealand’s economic and social institutions is enhanced by robust protection of property rights and an independent judiciary that enforces anti-corruption measures. While many large advanced economies have been struggling with growing debt burdens caused by years of heavy government spending, New Zealand has kept its gross public debt under control.

Facts and Figures in New Zealand That Will Interest You as an Investor/Entrepreneur

  • Rule of Law

New Zealand ranked second out of 175 countries surveyed in Transparency International’s 2014 Corruption Perceptions Index. The country is renowned for its efforts to penalize bribery and ensure a transparent, competitive, and corruption-free government procurement system. The judicial system is independent and functions well. Private property rights are strongly protected, and contracts are notably secure.

  • Limited Government

The top income tax rate is 33 percent, and the top corporate tax rate is 28 percent. Other taxes include a goods and services tax and environmental taxes. The overall tax burden equals 32.1 percent of total domestic income. Government spending amounts to 42.4 percent of GDP. The deficit has been reduced to below 2 percent of total domestic output, and public debt equals 34 percent of GDP.

  • Regulatory Efficiency

Start-up companies enjoy great flexibility under licensing and other regulatory frameworks. With no minimum capital required, it takes only one day to start a business. Flexible labour regulations facilitate a dynamic labour market, increasing overall productivity. New Zealand has the lowest subsidies among OECD countries. It removed all farm subsidies more than three decades ago, spurring development of a vibrant and diversified agriculture sector.

  • Open Markets

New Zealand’s average tariff rate is 1.4 percent, and non-tariff barriers are low. The government owns shares of companies operating in sectors that include rail transportation, energy, air transportation, and postal services. The financial system has remained stable, and prudent regulations allowed banks to withstand the global financial turmoil with little disruption.

Factors and Incentives that Encourages You to Venture into Business in New Zealand

New Zealand has been ranked as the easiest place to start a business out of 185 countries, in a major report out today. The World Bank and International Finance Corporation’s Doing Business 2015 report said it takes only one day and one procedure to register a private company in New Zealand. Ranking highly on the ease of doing business index means a country’s regulatory environment is more conducive to starting and operating a firm, the report said.

New Zealand was also rated highest for protecting investors and the third most business-friendly economy. The World Bank said that by allowing credit bureaus to collect positive information on individuals, New Zealand had made it easier to access to credit information.

New Zealand’s wealth has grown more than that of any other country in the world since 2000, according to a new report released by Credit Suisse. It ranks NZ top, just ahead of Australia, in wealth growth per adult in the past 14 years, with both countries ahead of China.

The report says New Zealand has benefited from “favourable currency movements” and when measured at current exchange rates, the average wealth of New Zealanders has grown by more than 300 per cent since 2000. The New Zealand dollar was trading at around the 40 US cent mark in 2000. This morning the local currency was trading at 78.33 US cents.

Starting a Business in New Zealand – Market Feasibility Research

The economy of New Zealand is a mixed economy that depends greatly on international trade, mainly with Australia, the European Union, the United States, China, South Korea and Japan. The Closer Economic Relations agreement with Australia means that New Zealand’s economy is closely aligned with the Australian economy.

New Zealand’s economy has a sizable service sector, accounting for 63% of all GDP activity in 2015. Large scale manufacturing industries include aluminium production, food processing, metal fabrication, wood and paper products. Mining, manufacturing, electricity, gas, water, and waste services accounted for 16.5% of GDP in 2015. The primary sector continues to dominate New Zealand’s exports, despite accounting for 6.5% of GDP in 2015.

The major capital market is the New Zealand Exchange, known as the NZX. As of November 2014, NZX had a total of 258 listed securities with a combined market capitalisation of $94.1 billion. The currency is known as the New Zealand dollar, which is also the currency of five Pacific Island territories. The New Zealand dollar is the 10th most traded currency in the world.

List of Well Known Foreign Brands Doing Business in New Zealand

Many people travel overseas in order to partake in a process of self-reflection and immerse themselves in foreign cultures that will somehow alter their character when they return home. Others love to travel overseas to undergo extensive retail therapy and eat food in humorously large quantities and levels of deliciousness never experienced in little old New Zealand. Some also travel to find greener pastures or expand their businesses. Well known foreign brands in New Zealand include:

  • Gucci
  • Prada
  • Zara
  • Apple
  • Tiffany
  • ASOS
  • Legoland
  • Louis Vuitton
  • Swarovski
  • Christian Dior
  • Topshop
  • Google

List of Well known Indigenous Entrepreneurs in New Zealand

The following is a list of notable business people from New Zealand. This is a dynamic list and may never be able to satisfy particular standards for completeness.

  • Gregory Fortuin
  • Sir Jack Harris
  • Graeme Hart
  • Murray Haszard
  • Michael Hill
  • Dick Hubbard
  • Christopher Peter Huljich
  • Sir Robert Jones
  • Robert Laidlaw
  • Sam Morgan

List of Well known Indigenous Businesses in New Zealand

  • I love Ugly
  • Moreporks
  • Shark Week
  • Whittaker’s chocolate
  • Tip Top
  • All Blacks
  • Cadbury
  • Trade Me
  • Air New Zealand
  • Pineapple Lumps
  • Heinz Wattie’s

5 Best Cities to Do Business in New Zealand

New Zealand has an open economy that works on free market principles. Over the last 30 years the New Zealand economy has gone from being one of the most regulated in the OECD to one of the least regulated, most free-market based economies.

Fertile soil and excellent growing conditions coupled with sophisticated farming methods and advanced agricultural technology provide the ideal environment for pastoral, forestry and horticulture activities. Various primary commodities account for around half of all goods exports and New Zealand is one of the top five dairy exporters in the world.

Best cities to start in Business in New Zealand are;

  • Auckland
  • Wellington
  • Christchurch
  • Dunedin
  • Palmerston North

Economic Analysis

Noting that New Zealand’s economic growth has been faster than most other developed countries in recent years, the OECD commented in 2015 that: “inflation and inflation expectations are well anchored. Strong fiscal monetary policy frameworks and a healthy financial sector have yielded macroeconomic stability, underpinning growth. Employment is high, in large part thanks to flexible labour markets and ample immigration, business investment is robust and households and firms are optimistic.”

Between 2000 and 2007, the New Zealand economy expanded by an average of 3.5% each year as private consumption and residential investment grew strongly. Annual inflation averaged 2.6%, inside the Reserve Bank of New Zealand’s 1% to 3% target range, while the current account deficit averaged 5.5% of GDP.

Like most OECD countries, New Zealand’s economy experienced an economic slow-down following the global financial crisis in September 2008. As in other advanced economies, business and consumer confidence declined. Unlike most OECD countries however, after a 2% decline in 2009, the economy pulled out of recession. It achieved 1.7% growth in 2010, 2% in 2011 and 3% in 2012. That compared with 0.3% growth in the UK and negative 0.9% in the euro area; 0.4% in Japan; 1.1% in Canada; and 1.6% in the USA.

By December 2015, annual growth had risen to 3.3%, the fastest rate of expansion in six years and, according the New Zealand Treasury, one of the strongest performances in the OECD. Growth for 2016 is expected to be around 3%, supported by net migration flows, labour income growth, and construction activity.

It is expected to fall back for 2017 and 2018, largely due to deteriorating terms of trade, particularly for our dairy exports. This factor has been somewhat offset however by falling oil prices and a lower exchange rate which is helping exporters. From 2019, growth is forecast to pick up again.

The New Zealand stock market has recovered strongly from the global financial crisis, up 121% from 1 April 2009 to 30 June 2015. Despite key economic drivers coming off their highs, steady economic growth and a weaker currency is expected to underpin corporate earnings and securities valuations in the medium term.

Possible Challenges and Threats of Starting a Business in New Zealand

New Zealand ranks among the top five countries in the world for ease of doing business, but having insight to the investment environment and local knowledge of the legal, accounting and taxation framework is essential to succeed. New Zealand has laid out a welcome mat for foreign direct investment, offering incentives, rewards and a stable business environment.

But having local knowledge of the legal, accounting and taxation framework is essential to any overseas venture, and there are still several challenges to overcome when setting up in the Pacific island.

  • Dealing with Construction Permits
  • Registering property
  • Getting electricity
  • Getting Credit and Protecting Investors
  • Paying taxes
  • Trading across borders
  • Enforcing Contracts
  • Resolving Insolvency
  • Cultural
  • TMF groups

Starting a Business in New Zealand as a Foreigner – Legal aspect

  • License and Permits Needed to Do Business in New Zealand

It’s not just Inland Revenue or the Companies Office you might have to work with. Regional councils and other bodies may also play a part in the setting up of your business.

If you plan to work from home, for example, or you want to open a café or bakery, you have to apply for a licence first with your regional council. Your local council also regulates health and safety standards for all businesses and building permits, so it’s worth making contact before you start your business.

Here are some types of permit that will be needed;

  • Health and safety permit
  • Regional council permits
  • Business license
  • Insurance policies
  • ACC levies
  • Filling returns

The Best Legal Entity to Use in New Zealand

Businesses in New Zealand generally use one of these three structures:

  • Sole trader

A sole trader operates a business on their own. The trader controls, manages and owns the business and is entitled to all profits but is also personally liable for all business taxes and debts. Usually a sole trader can establish the business without following any formal or legal processes and can employ other people to help run the business.

Many New Zealand businesses start as sole traders and then progress to a company structure as the business grows. Others form companies right from the start to take advantage of the protection and other benefits offered by the company structure.

  • Partnership

Partnerships are most common among professional people and in the farming industry. This type of structure can be an effective way to share business operation costs where, for example, several professional people operate out of a joint office.

Many partnerships are established with a formal partnership agreement. The partnership itself does not pay income tax. Instead it distributes the partnership income to the partners. The partners then pay tax on their own share. Once the automatic option for professional people such as lawyers, doctors and accountants, partnerships are no longer as popular.

This is because professionals can now adopt a company structure and may offer better protection. A well thought-out partnership agreement is essential to cover contingencies and possible conflicts. No registration is required to start a partnership.

  • Limited liability Company

A company is a formal and legal entity in its own right and separate from its shareholders or owners. Shareholders’ liability for losses is limited to their share of ownership of the company. This does not apply when company directors have given personal guarantees for company debts, where a company has been trading while insolvent or is considered to be ‘trading recklessly’.

In New Zealand, you can register (incorporate) a company online through the Companies Office. There is a small fee, currently NZ$150.The limited liability company has proven to be the most popular and successful form of business structure in New Zealand.

It has the advantage of helping foster confidence in the businesses by governing the relationships between investors (shareholders), directors and creditors and by giving customers, investors and other stakeholders a clearer picture of who and what they are dealing with.

Other Possible Business Structures

  • Look-Through Company (LTC)

This is a variation of a company structure that lets you offset any losses incurred in running your business against personal income from other sources (such as investments). It requires applying to Inland Revenue for special tax status.

An LTC must be a New Zealand tax resident company, it must not have more than five owners and it must not be a flat (i.e. apartment) owning company. You should discuss this option with your accountant or solicitor before making any decisions.

  • Trading Trust

A trading trust is a trust that carries on a business. This structure can offer benefits, but it is complicated and requires expert advice. Discuss the option with your accountant and your lawyer to see if it is more appropriate for your needs than the business structures outlined above

  • Co-operative

A co-operative business is owned and democratically controlled by its shareholder/members. The shareholders/members contribute the prime capital for the business and share in the profits of the business in proportion to their participation: the greater the participation, the larger the proportion of profits.

An example of this type of enterprise is a group of craftspeople banding together to jointly market their various craft products through a co-operatively owned and staffed studio or retail shop.

Legal Documents Needed to Run a Business in New Zealand

  • Commercial agreement – Some simple agreements commonly used by companies in New Zealand are mutual confidentiality agreement, service agreement etc.
  • guidance notes
  • Governance – These documents are designed to help early stage companies get the basics right – simple but company-friendly constitutional documents, share registers and resolutions
  • Intellectual property
  • Fund raising – These documents are intended for use by companies seeking funds from seed investors – they are not intended for use with professional investors (e.g. by angel associations or venture capitalists – who will have their own investment documents). Regardless of the investor, though, some documents will be useful to help a company get investment ready (e.g. the due diligence checklist)
  • Employee share option documents – A set of employee share option documents for use by companies taking advantage of the employee share purchase schemes exclusion under the Financial Markets Conduct Act 2013
  • Employment agreements
  • Website documents

Agencies in Charge of Registration and Issuing License to Businesses in New Zealand

  • Inland Revenue

All businesses must register with Inland Revenue for tax purposes, but companies also have to be incorporated with the Companies Office. The first step is to get an IRD number from Inland Revenue.

  • The Companies office

The Companies Office is the New Zealand government agency responsible for the administration of corporate body registers, including the Companies Register, occupational registers and the register of personal property securities (PPSR). It is an operating business unit within the Ministry of Business, Innovation, and Employment. The Companies Office has two main objectives:

  • To facilitate ease of doing business in New Zealand by providing easy to use and highly available corporate registers and easily accessible information.
  • To maintain confidence in the corporate registers it administers through a focus on integrity and taking enforcement action where this is necessary.

Regional council

Every region in New Zealand has licenses and permits required for every prospective business to have before opening. It is strongly recommended that you research about the permits required for your business even before investing.

  • To facilitate ease of doing business in New Zealand by providing easy to use and highly available corporate registers and easily accessible information.
  • To maintain confidence in the corporate registers it administers through a focus on integrity and taking enforcement action where this is necessary.
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