Company formation in New Zealand

Advantages of Company Formation in New Zealand

New Zealand offers favorable conditions for starting a business and has unique benefits that should be considered when choosing a jurisdiction. The advantages of registering a company in New Zealand include:

• Developed sectors ideal for investment

New Zealand has well-developed sectors such as financial services, agriculture, mining, and energy. Each sector can be a promising area for investment.

• Ease of company registration and simplicity of doing business

In New Zealand, you won’t have to worry about excessive restrictions and prohibitions on business activities. The country is business-friendly and welcoming to investors from around the world, making it easy to register a company and convenient to operate.

• Legislation supporting startups

Startups receive various benefits and allowances regarding their tax obligations. When determining the payable corporate tax, the company’s losses are considered to calculate the net taxable profit. If a startup has significant losses associated with business development and investments, it may qualify for a Tax Credit under certain conditions.

• Widespread non-governmental support for startups

In addition to government support, there is a growing trend in New Zealand for entrepreneurs to seek assistance from business angels (Business Angels or Angel Investors). These are either groups or individuals interested in investing in promising projects. Such financial and other support often provides the necessary boost for businesses to grow quickly and successfully. The New Zealand government supports the spread of business angels.

• New Zealand’s Image

New Zealand has a strong international reputation, making it a significant global financial center. It has never been listed as an offshore jurisdiction and is not considered an offshore entity.

Types of Business Entities in New Zealand

Companies in New Zealand are typically registered under one of the following commonly used legal structures:

• Limited Liability Company (LLC)

Members of this type of company are only liable for the company’s obligations up to the amount of their share. There is a limit on the number of members. The absence of personal liability for shareholders distinguishes an LLC from a Partnership. It is regulated by the Companies Act 1993. This is the most common type of company in New Zealand.

• Unlimited Company: Shareholders of an unlimited company bear full responsibility for the company’s debts, meaning they are liable for all the company’s obligations.

• Limited Partnership: Limited partnerships in New Zealand are regulated by the Limited Partnerships Act 2008. In a limited partnership, there are two types of partners: general partners, who have personal liability for the partnership’s obligations similar to general partnerships, and limited partners, whose liability is limited to the amount of their contribution as agreed upon in the Partnership Agreement. A limited partnership must have at least 1 general partner and at least 1 limited partner.
• Co-operative Companies: Cooperatives in New Zealand are regulated by the separate Co-operative Companies Act 1996. The main characteristic of a cooperative is the joint activity of its members on a mutual basis.

• Trusts

In New Zealand, creating trusts for asset protection is very common. Choosing New Zealand as a jurisdiction for establishing trusts is unsurprising, as trusts in this country are characterized by high levels of security and confidentiality. There are several types of trusts in New Zealand, including business trusts, “parallel” trusts (two separate trusts for individual partners), family trusts, charitable trusts, and more. Each type has its own purposes and benefits, so before creating a trust, our specialists can help you choose the right one according to your needs. The most common are business trusts, used for both asset protection and effective tax planning.

Company Registration Procedure in New Zealand

Registering a company in New Zealand is done through the New Zealand Company Register.

To start the registration process, identification documents for all company participants are required (check the list of documents with our specialists), as well as the following information:

1. 2-3 names for the new company in order of priority;
2. structure of the new company (who is the director, shareholder, beneficiary);
3. type of activity of the new company.

After receiving all the necessary documents and information, the registration of the company in New Zealand will begin. The entire process, from obtaining the necessary documents for registration to the final preparation of corporate documents for the completed company, includes the following stages:

1. Checking the company names and selecting an acceptable one. The name check takes no more than 1 day. The name of the new company must be reserved.
2. Submitting registration documents to the Register. Preparing the registration application, submitting it to the Register, and providing all necessary registration data.

3. Registration of the application by the Register, the company registration procedure in the Register, and issuance of the Certificate of Incorporation. The registration process takes an average of 7-10 days.
4. Preparation of statutory documents for the registered company and production of the seal.

5. Notarization and apostille of documents (if necessary). The notarization process takes 1-2 days, while apostille certification takes between 6 to 8 days. New Zealand is a member country of the 1961 Hague Convention on Apostille, making apostille certification widely accepted.

After registering the company and notarizing the documents, the next usual step is obtaining the GST number (Goods & Sales Tax Number). Companies must register for GST if their income exceeds NZD 60,000 per year. It’s permissible to register for GST concurrently with company registration, which is quick and free.

Noteworthy Features of New Zealand to Know

• Not all companies in New Zealand are required to file annual reports with the Companies Office. Reporting obligations are only for large companies. Section 196 of the Companies Act 1993, as amended by the Financial Reporting Act 2013, specifies that reporting requirements apply to:

1. 1. every large New Zealand company;
   2. every large foreign company conducting business in New Zealand;
   3. any other company with 10 or more shareholders (if shareholders do not opt out);
   4. any other company with fewer than 10 shareholders, if shareholders owning at least 5% of voting shares require compliance.

• New Zealand law states that shares must not have a nominal value. Section 38 of the Companies Act 1993 specifies: “A share must not have a nominal value.”
• Companies in New Zealand are not required to have a Constitution. According to section 26 of Part 5 of the Companies Act, a company may, but is not obliged to, have a Constitution. If a company has a Constitution, the rights and obligations of the company, board of directors, each shareholder, and each director are determined by the Constitution. If a company does not have a Constitution, the rights of these parties are determined by the Companies Act. A New Zealand company’s Constitution may cover matters regulated by the Companies Act and any other matters its founders choose to include. Shareholders of a company without a Constitution may adopt one by special resolution.
• Some companies in New Zealand may opt for taxation as Look-Through Companies or Portfolio Investment Entities (PIEs), offering several advantages. Otherwise, companies are generally taxed equally regardless of residency or legal form.
• New Zealand and Australia widely use the concept of imputation credits, also known as imputation tax credits. This tool aims to prevent double taxation. In New Zealand, dividends are generally included in the profit tax base, so separate tax on dividends is usually not required. However, a New Zealand company can choose the extent of imputation credits it wishes to apply—full, partial, or none at all. If a company opts for no credits or partial credits, the tax rate on dividends paid by a New Zealand company to non-residents may be 30%. The tax rate can also be 33%, 10%, or 0%.

Corporate Taxation in New Zealand

Determining a company’s residency is crucial for taxation purposes. According to New Zealand law, a company is considered a resident if it is incorporated in New Zealand, has its center of management and/or control in New Zealand, or conducts activities in New Zealand that generate its primary income.

Taxation varies depending on the company’s residency status.

• Corporate Income Tax
  • Resident companies in New Zealand are liable for tax on worldwide income.
  • Non-resident companies are liable for tax only on income sourced in New Zealand.
  • The standard corporate income tax rate is 28%.
• Dividend Tax
  • In New Zealand, dividends are considered company income and are generally included in the taxable income base. Different imputation credit systems lead to varying tax obligations regarding dividends (read more in the section “Noteworthy Features of the Jurisdiction”). The dividend tax rate can be 33%, 30%, 15%, or 0%.
  • It’s worth noting exceptions apply to dividends received by resident companies from foreign sources.
• Capital Gains Tax
  • Generally absent in New Zealand. However, certain capital gains, such as those from selling or transferring land, may be taxable.
• Royalty Tax
  • Non-resident royalties in New Zealand are taxed at a rate of 15%.
• Goods and Services Tax (GST)
  • GST in New Zealand is governed by special legislation – the Goods and Services Tax Act 1993.
  • The current standard GST rate in New Zealand is 15%. All taxable transactions must be reported in a special tax return.
  • Reduced GST rates are not provided for, but partial refunds of paid tax are possible under certain circumstances, and some goods and services are exempt from GST (consult our specialists for details).

Filing and Preparation of Financial Reports in New Zealand

Preparation and submission of financial reports in New Zealand are regulated by the Companies Act 1993 and the Financial Reporting Act 2013.

Financial reporting in New Zealand generally follows the Generally Accepted Accounting Principles (GAAP).

Reports are prepared annually for the entire reporting period of the company. The end date of the reporting period is typically March 31, unless otherwise agreed by the board of directors. Company reports must be prepared within 5 months after the end of the reporting period.

Financial documentation must accurately and comprehensively reflect a company’s operations.

In the Companies Act 1993, it’s stated that accounting records do not necessarily need to be kept in New Zealand, but the Registrar must be informed of their storage location.

Since in New Zealand, the obligation to file reports exists only for large companies, it’s important to understand what constitutes a “large” company under New Zealand law. According to the Financial Reporting Act 2013, a “large” company in New Zealand is defined as follows:

1. For resident companies: if in each of the two preceding reporting periods, the total assets of the entity and its subsidiaries (if any) exceeded NZD 60 million;
   and/or
   if in each of the two preceding reporting periods, the total revenue of the entity and its subsidiaries (if any) exceeded NZD 30 million.
2. For non-resident companies: if in each of the two preceding reporting periods, the total assets of the entity and its subsidiaries (if any) exceeded NZD 20 million;
   and/or
   if in each of the two preceding reporting periods, the total revenue of the entity and its subsidiaries (if any) exceeded NZD 10 million.

Conclusion

Company registration in New Zealand combines several characteristics that are unique compared to other jurisdictions. The policies of New Zealand government agencies are aimed at fostering business development, attracting investments, and consequently, streamlining the processes of company formation and business operations. In New Zealand, having a Сonstitution is optional, specifying the nominal value of shares is not required, not all companies need to file annual reports, and the registration process is straightforward and convenient with simplified steps towards establishing the business you’ve always wanted to own. Company formation in New Zealand is a step towards unlocking numerous opportunities and prospects for your project.