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New Residence & Ownership Rules For New Zealand Companies

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New_Zealand_Corporate.jpgThis blog sets out the key changes to residency and overseas ownership rules affecting New Zealand companies and Limited Partnerships.

During the last 12 months, legislation came into effect in New Zealand which introduced new residency and ownership rules for corporate entities.

Resident Director - New Zealand Companies

All New Zealand companies must have at least one individual director who is either:-

  1. an individual who lives in New Zealand; or
  2. an individual who lives in Australia and is also a director of a company incorporated in Australia.

Corporate directors are not permitted under the Companies Act in New Zealand.

Related: New Residency Rules For New Zealand Limited Partnerships

Resident General Partner – Limited Partnerships

Similar to the New Zealand residency rules for companies, all New Zealand LPs must have at least one General Partner who is either a:

  1. Resident Company - a limited liability company incorporated in New Zealand that has at least one director who is a natural person who lives in New Zealand (or lives in Australia and who is a director of a company, other than an overseas company, in Australia); OR
  2. Resident LP - a limited partnership that has at least one general partner who is a natural person who lives in New Zealand (or lives in Australia and is a director of a company, other than an overseas company, registered in Australia); OR
  3. Resident Individual - a natural person living in New Zealand (or in Australia and is a director of a company, other than an overseas company, registered in Australia); OR
  4. Resident Partnership - a partnership governed by the Partnerships Act 1908 that has at least one general partner who is a natural person who lives in New Zealand (or in Australia and is a director of a company, other than an overseas company, registered in Australia); OR
  5. Company registered in New Zealand as an overseas company – an overseas company registered in New Zealand under the Companies Act 1993 that has at least one director who lives in New Zealand (or in Australia and is a director of a company, other than an overseas company, registered in Australia).
Related: Changes for New Zealand Companies – Companies Amendment Act 2014

Overseas Ownership – Tax Registration By ‘Offshore Persons’

The tax registration procedure has also changed for entities which meet the overseas ownership criteria.

Certain corporate entities are now classified as ‘offshore persons’ for tax registration based on ownership and control of the entity, as defined below.

Definition Of Offshore Persons

A company is an offshore person if it is:

  • incorporated outside New Zealand, or
  • 25% or more owned or controlled by offshore persons

A non-individual partnership, unincorporated joint venture, or other unincorporated body is an offshore person if:

  • 25% or more of its partners (or members) are offshore persons, or
  • offshore person(s) have a beneficial interest or entitlement to 25% or more of its profits or assets, or
  • offshore person(s) have the right to exercise (or control the exercise) of 25% or more of voting power at a meeting.

Related: A Guide To Re-Domiciling Companies To New Zealand

New Requirement - Functional Bank Account

Offshore persons are required to have a fully functional bank account in New Zealand in order to obtain a tax number. The details of this bank account must be disclosed to the Inland Revenue in the tax registration application.

All partners of an LP, including overseas partners, must obtain a tax number in New Zealand.

Related: Residency Rules For New Zealand Companies - Key Dates

Final Comment

The requirement for offshore persons to have a New Zealand bank does not currently affect entities that have already obtained a tax number in New Zealand. The new tax registration procedure is a result of tightening of the property taxation rules but has extended to all entities regardless of whether they buy or sell property in New Zealand.

Guide to New Zealand Structures - Webinar

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