BUSINESS AND INVESTMENT POLICY

The objective of Business Immigration Policy is to contribute to New Zealand's economic growth by fostering outside links, increasing New Zealand's level of human capital and encouraging enterprise and innovation.

Business Immigration Policy is a special category. There are five main applications of interest.

INVESTOR POLICIES

The Investor category of residence is split into two investment tiers depending on the amount of available investment (and other requirements).

The two current investor policies were introduced on 27 July 2010. They are the Investor Plus Category and the Investor (2) Category.

The table below sets out a brief summary of the main requirements under the Investor Plus and Investor (2) Categories:

Significant and detailed policy applies to each of these investor categories although we list below some of the key aspects of the particular policies which are of interest for initial review.

Due to the nature of the practice of our law firm (providing high level legal advice through all areas of law within New Zealand) we are able to provide sound and detailed legal advice to prospective applicants under these investor policies in terms of material consideration such as taxation, establishing pre-migration trusts, referrals to sound investment advisers and general corporate/commercial legal advice where required.

We summarise some key points of interest here although full tailored advice is required for each individual investor depending upon their particular circumstances. It should also be noted, that if an investor is not able to achieve one or more of the key requirements listed in the above table, depending upon the level of investment and the ability for the investment to benefit New Zealand there is scope to receive ministerial approval to obtain visas under the investor categories as an exception to Government residence policy (refer to our section regarding special directions from the Minister of Immigration).

ACCEPTABLE INVESTMENT

The definition applied by INZ in relation to the term “acceptable investment” is as follows.

An acceptable investment means an investment that:

• is capable of a commercial return under normal circumstances; and
• is not for the personal use of the applicant(s); and
• is invested in New Zealand in New Zealand currency; and
• is invested in lawful enterprises or managed funds that comply with all relevant laws in force in New Zealand; and
• has the potential to contribute to New Zealand's economy; and
• is invested in either one or more of the following:
  • bonds issued by the New Zealand government or local authorities; or
  • bonds issued by New Zealand firms traded on the New Zealand Debt Securities Market (NZDX); or
  • bonds issued by New Zealand firms with at least a BBB- or equivalent rating from internationally recognised credit rating agencies (for example, Standard and Poor's); or
  • equity in New Zealand firms (public or private including managed funds); or
  • bonds issued by New Zealand registered banks; or
  • equities in New Zealand registered banks; or
  • residential property development(s)

For the purposes of these instructions, residential property development(s) is defined as property(ies) in which people reside and is subject to the following conditions:

• the residential property must be in the form of new developments on either new or existing sites; and
• the residential property(ies) cannot include renovation or extension to existing developments; and
• the new developments must have been approved and gained any required consents by any relevant regulatory authorities (including local authorities); and
• the purpose of the residential property investments must be to make a commercial return on the open market; and
• neither the family, relatives, nor anyone associated with the principal investor, may reside in the development; and
• the costs associated with obtaining any regulatory approval (including any resource or building consents) are not part of the principal applicant's acceptable investments.

In relation to residential property development, this is a relatively recent change that has been made to policy to allow overseas capital to flow in to residential property development in New Zealand, due to concerns regarding a shortage of housing stock in the long term. In addition, the ability of high net worth investors being able to invest in residential property development, particularly in the Canterbury region, is also seen as advantageous, due to the significant demand for housing in the region in the short to mid term.

On a final point, it is important to note that even though fixing funds in bank deposits is not acceptable, banks operating in New Zealand have developed investment packages compliant with Immigration criteria. Many private equity companies also in New Zealand have established investment packages which comply with the new regulations. Suitable referrals can be made by this firm for appropriate advisers depending upon the type of investment envisaged.

PHYSICAL PRESENCE REQUIREMENT

Whilst the physical presence requirement does not appear onerous, and in relation to both categories will not automatically trigger tax residence status in New Zealand, it will be important for any individual who holds significant business assets and anticipates receiving overseas income (especially overseas income post the four year investment period) to receive very good taxation advice both in their current country of residence and New Zealand before submitting an application. Having an ability to legally manage tax liability the New Zealand Inland Revenue "permanent place of abode" test will be important to a number of investors, particularly under the Investor Plus Category.

Various processes and documentation can be put in place and guidance provided in relation to managing tax liability. Sound advice should be received before any investor makes an application under these policies.

There are limited opportunities to incorporate and establish pre-migration trusts before the migration move and not receiving sound advice and assistance in this area before steps to travel to and live in New Zealand under these policies can lead to a significant tax burden which in some instances can be legally managed with sound Trust planning undertaken at an early stage in the immigration due diligence process.

CAP

There is no cap on the Investor Plus (Investor One Category), although it should be noted that under the Investor (Investor Two Category) there is a cap of 300 main applicants per annum.  This cap will be filled relatively quickly on an ongoing basis and therefore if this policy is attractive to a reader steps should be undertaken immediately to confirm eligibility and to submit an application to secure one of the 300 places to avoid unnecessary delays.

LONG TERM BUSINESS VISA, ENTREPRENEUR CATEGORY AND ENTREPRENEUR CATEGORY PLUS

LONG TERM BUSINESS VISA POLICY

There is a broad assumption that the Long Term Business Visa (LTBV) category is a type of New Zealand residence application. This is not the case. The LTBV is essentially a three year temporary work visa which allows an individual the opportunity to make an investment in a New Zealand business (minimum 25%) by purchasing or establishing a new business. After operating the business for a two year period within the three year currency of the LTBV, an application for New Zealand residence can then be made under the Entrepreneur Category (refer below).

There are various requirements for a successful LTBV application, and considerable discretion can be exercised by the immigration officer processing the application. Generally however, in order to obtain an LTBV the individual applying for the visa must:

1. Hold a satisfactory business plan;
2. Have business experience relevant to the business proposal;
3. Have not been involved in bankruptcy or business failure within the five years preceding the date of the application;
4. Have not been involved in business or financial impropriety;
5. Have, in addition to the investment capital required for the business plan, sufficient funds for the maintenance and accommodation of the applicant applying and/or family members included in the application for the entire currency of the LTBV;
6. Satisfy INZ that the applicant is genuinely interested in establishing a business in New Zealand.

BUSINESS PLAN

The most crucial part of an LTBV application is the business plan.

It is advisable that the business plan is prepared by a New Zealand Chartered Accountant, and preferably, a Chartered Accountant who has previous experience in preparing business plans for LTBV applications.

There are two crucial parts of the plan that should be given significant attention.

First, demonstrating that the applicant has the required knowledge and has conducted sufficient research regarding the plan and New Zealand business environment.

Second, providing information as to how the proposed business will actually benefit New Zealand and prove to INZ that the business will be profitable or at least have the potential to be trading profitably at the time an Entrepreneur Category application is lodged.

RESEARCH

We would discourage individuals from applying for an LTBV unless the individual has actually travelled to New Zealand to undertake some market research and received advice from their New Zealand accountant to be instructed to draft the plan.

Although not impossible to obtain an LTBV before travelling to New Zealand, immigration officers are usually hesitant to grant LTBV's if the individual in question has never been to New Zealand and therefore does not understand the New Zealand business environment.

With any serious business plan, market research must be undertaken, and although a New Zealand based Chartered Accountant can assist with this, it will be materially important for any applicant to demonstrate that they have taken the time to travel to New Zealand to research their proposal.

THE BENEFIT AND PROFITABILITY TEST

INZ will need to be suitably satisfied that the business has the potential to actually benefit New Zealand and be profitable. A business will be considered to benefit New Zealand and satisfy the profitability test if it contributes to New Zealand's economic growth. INZ will take into consideration (among other things) the following:

1. Whether the business will introduce new, or enhance existing technology, management or technical skills; or
2. Whether the business will introduce new or enhance the existing products or services; or
3. Whether the business plan will create new, or expand existing export markets; or
4. Whether the business plan will create employment (for a New Zealand citizen or permanent resident); or
5. Whether the business proposal will revitalise an existing business; and
6. Whether it appears likely the business will be trading profitably at the time any subsequent application under the Entrepreneur Category is made, or clearly has the potential to be trading profitably within 12 months after the date of the submission of the Entrepreneur Category application.

While the applicable policy above provides a guide as to how a business is determined to benefit New Zealand, what applicants should be aware of is the actual way INZ practically apply the policy. INZ want to see business plans which require significant investment, that are going to introduce something that is perhaps new to an area, that are not merely going to create more competition, and are not merely going to employ the applicant and/or their family members but also actually create employment opportunities for New Zealand citizens or New Zealand residents.

While obtaining an LTBV can be a difficult process in itself, it is very much only the first stage of the process for an applicant to move towards holding the right to indefinitely reside in New Zealand. The second stage of the process, which is more important than the initial LTBV application, is the subsequent application for New Zealand residence under the Entrepreneur Category.

Before any LTBV application is considered, it is also material to consider the current policy governing the grant of residence under the Entrepreneur Category.  Many applicants who do not receive accurate advice and assistance do not consider this policy before applying for an LTBV.

ENTREPRENEUR CATEGORY

The objective of the Entrepreneur Category is to attract migrants who can demonstrate that they have been actively participating in a business and contributing to New Zealand's economic development.

An applicant must demonstrate that they have been legally involved in the management and operation of their own business in New Zealand for a minimum of two years immediately preceding the application, the business is profitable, and is benefiting New Zealand in some way.

An individual will be considered to have successfully established a business in New Zealand if they have established or purchased or made a substantial investment (at least 25%) in a business operating in New Zealand and the main applicant of the Entrepreneur Category application has been self employed in the New Zealand business for at least two years preceding the date the application for residence under the Entrepreneur Category is made.

INZ have been very strict in relation to the definition of an applicant operating a business.  An applicant will not be deemed to be operating the business if the investment has been passive or speculative in nature only.

ENTREPRENEUR CATEGORY BENEFIT TEST

Under the Entrepreneur Category, INZ will determine whether or not the business at the time of submission of the application is also materially benefiting New Zealand. The same benefit test is applied to individuals demonstrating that the business will benefit New Zealand in an LTBV application.

It is, therefore, very important that when an LTBV application is submitted, the benefits to New Zealand are not padded, as the benefits advised in the LTBV application will be a starting point for the INZ officer processing the Entrepreneur Category application.

Obviously, if the business environment has negatively impacted on a business and some benefits envisaged in the LTBV did not eventuate, this would be explainable.

The bottom line, however, is that if an applicant is able to demonstrate the full time employment of at least one New Zealand citizen or resident, then this is currently enough to reach the benefit test.

ENTREPRENEUR CATEGORY PLUS

This policy provides a fast track method in order for an individual to obtain New Zealand residence if (in relation to the establishment of a business) they will invest at least $NZ500,000.00 and will create three full time employment positions for New Zealand citizens/residents. 

Whilst this policy is more designed for individuals who are going to travel to New Zealand permanently and be involved in the full time operation and management of their business, the relatively low investment required of $NZ500,000.00 with the creation of three full time employment positions is certainly achievable in certain business sectors of the market. 

The material benefit for this policy is it allows an applicant to obtain New Zealand permanent residence relatively quickly after obtaining an LTBV.  Obtaining and holding New Zealand permanent residence does and can assist with obtaining finance to support business ventures and also will allow dependant children between the age of 20 to 24 years of age to attend tertiary study in New Zealand at domestic school rates (LTBV policy only allows dependant children up to and including the age of 19 to attend primary/high schools in New Zealand at domestic school rates - international student rates apply for tertiary education).

An important point however to note under this policy is that residence is granted subject to the main applicant maintaining the minimum investment in New Zealand for the entire two year period and also sustaining the employment of the three full time New Zealand citizens/residents required.  If the investment is reduced and/or over the two year period the business is not able to maintain three full time employees then residence can be revoked for failure to comply with these conditions.  The Entrepreneur Category Plus therefore is only of benefit to applicants in certain limited situations and should only be applied for with sound and informed advice.

EMPLOYEE OF A RELOCATING BUSINESS CATEGORY

The objective of this category is to promote New Zealand as a place in which to invest and locate businesses. This is facilitated by granting residence to employees of businesses relocating to New Zealand who do not qualify for residence under any other existing category.

This category is designed for large corporations or multi-national companies intending to establish a branch in or relocate to New Zealand who require a key employee (or a number of key employees) to also relocate to ensure the successful establishment and operation of the business.