A Guide to Annual Leave Entitlements in New Zealand
When you assign employees abroad you are going to encounter different employment and labor laws, which can bring up questions from your staff. We had a client sending an employee
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Employing in New Zealand: What You Need to Know
New Zealand employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries. There are specific regulations on employment contracts, leave and pension contributions that must be understood fully. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in New Zealand.
Key Factors to Consider When Employing in New Zealand
There are several key areas to be aware of within New Zealand’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the New Zealand laws and rules for both New Zealand employees as well as foreign nationals.
New Zealand has traditionally had a workforce skilled in construction and production but there has been a long-standing shift towards employment in the services sector. A state-operated social welfare system provides benefits during sickness, unemployment, disability and retirement and is funded by general taxation.
Hiring in New Zealand? Here's our latest article on employment in New Zealand.-
Contracts
Every employee in New Zealand must have a written employment agreement that is agreed upon and signed by an employee before they start work. Employment agreements come in a variety of shapes and sizes depending on the job description, but there are certain mandatory clauses that every employment agreement must contain by law.
Under the Act, there are two types of employment agreements that cover all employees, regardless of profession or industry. These are individual employment agreements and collective agreements.
The official site for Employment Law in New Zealand is http://www.dol.govt.nz/
Employment Termination
| Information | Explanation |
|---|---|
| Severance / Redundancy Pay ? | There is no statutorily defined severance or redundancy pay scheme in New Zealand. Therefore employees are only entitled to severance pay or redundancy payment if it stipulated in the employment agreement. |
| Termination of Employment ? | Notice periods are not defined at law and instead should be ‘reasonable’. Generally a notice period should be specified in the employment contract and agreed upon by both parties. The notice period can be different for the employment period and the trial period. According to the NZ Consumer Affairs Bureau: “most employment agreements used by an employer may include a four weeks’ notice of dismissal clause in most of their employment agreements, but only two weeks’ notice for someone employed on a trial period“. In a trial period, an employer may terminate without needing a reason, and the employee cannot file for unfair dismissal on personal grounds, e.g. unless it is for something such as unlawful discrimination based on gender or race. |
| Probation Period Termination ? | During the probation period, the employer must follow a clear disciplinary or dismissal procedure. Also the employer cannot terminate without reason at the end of the probation period. Employees on probation have the full rights of unfair dismissal claims. Likewise, full employees may not be fired without clear reason and fair procedure. |
Probation
| Information | Explanation |
|---|---|
| Probation Period ? | In New Zealand ‘trial’ is distinguished from ‘probation’ and follow different rules. In either case it must be clearly specified in an employment contract and agreed upon by both parties. Trial An employer may employ someone on a trial period of up to 90 calendar days, but only if it is the first time you have been employed by this employer and by mutual agreement. Probation Probation is defined as the beginning of someone’s employment, where “the employee can show what they can do and the employer can assess them for suitability for permanent employment”. A maximum length does not appear to be specified at law and instead viewed as being long enough for the employee to demonstrate their suitability for the job. It is unclear whether an employment agreement can have both a trial and probation period, or only have one or the other, but the implication is that it should have one or the other. |
GEO Solutions or DIY Employment in New Zealand?
Companies entering New Zealand must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or New Zealand Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a New Zealand entity established that can run payroll.
A DIY approach will typically be delayed until there is a properly incorporated Branch Office or Company ready to run payroll and will include the cost of registered capital. The Shield GEO Solution is already properly incorporated in New Zealand, it has an active payroll and it is setup to sponsor work permits. This greatly reduces deployment times. Additionally Shield GEO is responsible for all compliance issues related to the employment.
Shield GEO
Shield GEO provides a fully outsourced employment service in New Zealand. Companies expanding into New Zealand can contract with Shield GEO to employ and payroll their staff on their behalf in New Zealand. Shield GEO then assumes the legal responsibility for these employees, becoming the Employer of Record, sponsoring them on work permits, complying with local employment law and running their monthly payroll.
| Tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Income Tax Rates | Monthly Taxable Income. Expats are able to offset their taxable income with relevant business expenses. Note that married people are taxed separately not jointly on all types of income. |
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| Tax Returns Supplied | Yes |
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| Employers Social Security and statutory contributions |
There is no Compulsory Social Security Scheme in NZ but employers are required to pay a levy towards the Comprehensive no fault Accident Compensation Scheme. Levies are payable on income up to NZD 118,191 for year ending 31 March 2015. Rates are dependent on industry. |
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| Employees Social Security and statutory contributions |
There is no Compulsory Social Security Scheme but employees are required to pay a levy towards the Comprehensive no fault Accident Compensation Scheme. Levies are payable on income up to NZD 118,191. Rates are 1.45% from April 2014. |
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| Insurance requirements | 1% Professional Indemnity and Public Liability Insurance |
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| Can supply private health care | Yes |
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| Can assist opening bank accounts | Yes |
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Work Permits
| Work Permits | |
|---|---|
| Can Sponsor Work Permit |
Yes, Shield GEO’s NZ entity is able to sponsor foreign workers on Work Permits which allow them to work in New Zealand. As the employer of record, Shield GEO handles all of the formalities and employment requirements in New Zealand. The client maintains responsibility for day to day employee management. |
| Work Permit cost | USD $3,000 |
| Work Permit processing time | 2-6 weeks |
| Work Permit process |
Shield GEO applies for an Essential Skills Work Visa. The application can be completed online along with supporting documents. An offer of employment must be submitted together with the Employer Supplementary Form. The employee must work in an occupation currently on one of the Essential Skills or Demand Lists. Evidence that the NZ health requirements must also be lodged: if working in NZ for less than a year a Chest X-ray Certificate is required, for more than a year a General Medical Certificate is also required. Additionally if the role is for 2 years + a police certificate from your country of residence is also required. The application must be lodged and approved before you can enter New Zealand and commence working. Documentation required : Completed Application Form, Employer Supplementary Form, Medical Certificates and Police Certificate as above, passport copy, passport photos, employment contract, professional references, copies of degree/diploma/professional certifications, |
| Can Work Permit be processed in country | Yes but nationality dependent |
| Switch Business Visa to Work Permit? | Yes but nationality dependent |
| Can Spouse work on dependent visa? | Yes |
Business Visas
| Business Visas | |
|---|---|
| Can do Business Visa | Yes |
| Business Visa Cost | USD $450 |
| Business Visa processing time | 5-10 days Consulate dependent |
Payroll and Tax in New Zealand
There are specific rules for payroll and taxation in New Zealand, depending upon whether your company employs foreign nationals or local New Zealand employees. A state-operated social welfare system provides benefits during sickness, unemployment, disability and retirement and is funded by general taxation.
The primary concerns for a foreign company that needs to comply with tax laws in New Zealand are: individual income tax (IIT) for employees in New Zealand, social security costs, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.
| Information | Explanation |
|---|---|
| Remote Payroll ? | A remote payroll in New Zealand is where a foreign company, i.e. a non-resident company, payrolls a resident employee in New Zealand. This applies to both local and foreign employees. The foreign company will need to register a branch, apply for an IRD and then register as an employer with the Inland Revenue. One option for a non-resident company to payroll its employees (local and foreign) in New Zealand is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf. |
| Local Payroll Administration ? | In some cases, a company will register their business in New Zealand under one of the forms available, (Branch Office, Limited Liability Company, or Limited Partnership) but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider. |
| Internal Payroll ? | Larger companies with a commitment to New Zealand may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a New Zealand payroll, and can fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with New Zealand employment laws. |
| Fully Outsourced Payroll & Employment ? | Companies can outsource the employment and payroll of their staff in New Zealand to a GEO, like Shield GEO. This is possible for both foreign workers and New Zealand nationals. This is the easiest, fastest and safest way to payroll staff in New Zealand. Shield GEO manages all aspects of payroll for workers in New Zealand, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client. Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips. Read more about outsourced payroll and employment through Shield GEO. |
Immigration and Work Permits in New Zealand
Foreign workers are required to have the proper visas and work permits in New Zealand, as established by immigration laws. Visitors from many countries do not require a visa for visits to New Zealand of less than three months. Generally, visitors are not allowed to work, however visas or work permits are available under various categories for people wishing to work in New Zealand either on a temporary or permanent basis.
Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the New Zealand market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.
Use the Shield GEO solution?
Shield GEO applies for an Essential Skills Work Visa. The application can be completed online along with supporting documents. An offer of employment must be submitted together with the Employer Supplementary Form.
The employee must work in an occupation currently on either the Essential Skills List or Demand Lists.
Evidence that the NZ health requirements must also be lodged: if working in NZ for less than a year a Chest X-ray Certificate is required, for more than a year a General Medical Certificate is also required.
Additionally if the role is for 2+ years a police certificate from your country of residence is also required.
The application must be lodged and approved before you can enter New Zealand and commence working.
Documentation required : Completed Application Form, Employer Supplementary Form, Medical Certificates and Police Certificate as above, passport copy, passport photos, employment contract, professional references, copies of degree/diploma/professional certifications.
Use your own company?
If the job role is on Long term skill shortage list the employer can get a work visa through Talent Work Category. A work visa will be granted for the length of the employment contract, up to a maximum three years.
If the job role the employer is seeking to fill is not on the skill shortage list or is not considered skilled according to the immigration department, the employer needs to demonstrate that they are not able to find suitably qualified New Zealand workers or New Zealand workers who could be trained to perform the respective job duties. Immigration New Zealand will carry out a labour test to determine the necessity of the candidate. To qualify for the labour market test before the employer has found a candidate, an Approval in Principle is required. This provides a pre-approval to hire individuals for a specified period of time (6-12 months).
Citizens and residents of Australia do not need a work visa to legally work in New Zealand. Proofs of documentation include Australian passport, Australian Permanent Resident visa or Australian Resident Return visa.
If an employer needs to hire a candidate for a specific purpose or event such as an intra-corporate secondment or senior level transfer, the candidates can be sponsored through a Specific purpose or Event category work visa.
Accredited employer
New Zealand employers can channel prospective employees through the Talent work visa category.
Employee eligibility:
- Aged 55 years or under
- Will be paid a salary of atleast NZ$55, 000
- Have a job offer that covers atleast 30 hours of employment per week for 2 years or more
- Adhere to New Zealand immigration health and character requirements
Employer eligibility:
An employer needs to submit an application form along with the fee and supporting information to the Business Immigration branch at the New Zealand Immigration office. Accredited employer status enables employers to recruit skilled workers with salary levels of more than NZ$55,000 per annum. Accreditation is valid for a 12 month period and can be renewed.
To qualify as an accredited employer a business must prove
– Business records and evidence of financial position for a period of atleast 2 years
– Annual reports
– Business plans
– Accounts certified by an accountant
– GST returns (turnover, revenue, expenses)
– Profit & loss statements
– Financial position statements
– Companies office registration details inclusive of details of directors, shareholders
– Company profile
– Organizational chart
– Documented human resource policy
- Human resource policies and procedures
- Employee policy handbook
- Work place practices
- Employment agreement
- Training policies and guidelines
- Training schedules
- Health and safety manual
- Best practices manual
– Evidence of training the business provides to New Zealand employees
- Records of in-house training and development programmes
- Training calendar
- Records indicating involvement with a New Zealand Training Organization (ITO) or funding of employees’ attendance at training sessions
- Records of apprentice/graduate programmes
- Records of courses provided by external training providers
- Training invoices
- Training certificates relevant to the employer
– Other factors considered by Immigration New Zealand in evaluating the application
- How long the organization has been operational
- Relationship with the relevant Industry Training Organization (ITO)
- Membership with Equal Opportunities (EEO) Employers’ group
- Whether the employer is an International Organization for Standardization (ISO) certified
- How long the employer intends to maintain accreditation
Cost for Employer Accreditation under Talent Work Instructions
First year accreditation NZ$1,700
Second and subsequent accreditation NZ$480
Steps to sponsor employees as an accredited Employer under Talent (Long Term Skill Shortage List)
- Employer should check if the job vacancy is on the Long Term Skills Shortage List
- Employer ensures job meets the appropriate employment criteria
Aged 55 years or under
Will be paid a salary of atleast NZ$55, 000
Have a job offer that covers atleast 30 hours of employment per week for 2 years or more
Adhere to New Zealand immigration health and character requirements
- Employee fills out a Work visa application form (INZ1015)
- Employer provides a job offer adhering to the employment criteria
- Employer fills in designated sections of the Employer Supplementary form (INZ1113) and provides it to the employee to send
- Employee submits the application to the nearest Immigration New Zealand branch
Supporting material that should be provided by employee:
- Two passport sized colour photographs taken within the past 6 months (45 mm X 35 mm)
- Passport or travel document (must be valid for atleast 3 months after the date the employee intends to leave New Zealand)
- Medical and chest X-ray certificates (INZ1007-General medical Certificate, INZ1096-Chest X-ray certificate)
- Police certificates from employee’s country of citizenship and any country that the employee has lived in five years or more since the age of 17
- A job offer letter should include: Employer’s name, employee’s name and address, designation, address of place of employment, job duties and responsibilities, pay and conditions of employment, qualifications and experience requirements, confirmation of whether or not registration in New Zealand is required, duration of the job, and how long the job would be available.
Types of visas in New Zealand
| Category | Description of Visa |
|---|---|
| Temporary Work Visas | Can be obtained by those who; |
| Essential Skills Work Visa | Requirements include: Essential work visas are issued for Australian and New Zealand Standard Classification of Occupations (ANZSCO) ranging from level 1 (high skilled) to 5 (low skilled). Visas for ANZSCO skill level 1-3 are issued for a maximum duration of three years. However, it can be issued for a five year duration given that: *ANZSCO skill level 1-3 visas can be extended upto a maximum duration of 3 years. Visas for ANZSCO skill level 4 and 5 are granted for a maximum duration of 1 year. Between July 1, 2015 and December 31, 2016 maximum duration for Essential skills ANZSCO skill level 4 and 5 has been extended from one to three years for work performed in Canterbury. ANZSCO level 1 visa: 5 year work visa maybe provided given that the job duration is for 5 years and the annual salary is at least NZ$55,000. This work visa can be renewed for a shorter duration of up to a maximum of 3 years. |
| Entrepreneur Work Visa | A 3 year work visa issued for entrepreneurs to move into New Zealand and establish or purchase a business. Issued as a 3 year work visa in two stages. Start-up stage: A 12 month work visa is issued to buy or establish a business in New Zealand. Balance stage: Issued for the remaining 24 months of the 3 years for which the entrepreneur work visa Eligibility requirements: Please contact us for a quote. |
Setting up a company in New Zealand
When setting up a company you may want to consider these factors:
-
Business Factors
- The industry and type of business
- Nationality of the headquarters/individual(s) and
- Presence of existing trade agreements or relationships
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Location
Location will be another factor, since separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.
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Regional Language
English is one of New Zealand’s two official languages, and is universally spoken. The other official language is Maori (Te Reo), which is spoken mainly by the indigenous population.
-
Visas
Visitors from many countries do not require a visa for visits to New Zealand of less than three months. Generally, visitors are not allowed to work here. However, visas or work permits are available under various categories for people wishing to work in New Zealand either on a temporary or permanent basis.
New Zealand has a relatively deregulated and open economy. It is consistently ranked as one of the easiest countries in which to do business, one of the least corrupt, and having one of the highest levels of economic freedom.
Major industries include agriculture, forestry, fishing, horticulture, manufactured goods and food processing.
Major imports include mineral fuels, mechanical and electrical machinery, vehicles, pharmaceuticals, textiles, and plastics. Major exports include dairy products, meat, wood, mineral fuels, machinery, fruit and nuts, wine, fish, wool, horticultural produce, manufactured goods and tourism.
Due to New Zealand being a small economy they welcome new companies from around the world to help with their isolation. They make it easy for foreign companies to come and do business. They were one of the first economies to increase interest rates after the GFC (Global Financial Crisis), which demonstrates the resilience of the New Zealand economy. Its major trading partner is Australia and both countries have a special economical relationship, allowing both nationalities to move and work without the need for visas.
New Zealand encourages foreign investment; nevertheless, consent is required for certain categories of investment in New Zealand by overseas persons. This process is administered by the Overseas Investment Office (OIO) on behalf of the government. The general categories for which OIO consent is required are investment in:
• ‘Sensitive’ land
• Business assets worth more than $100 million
• Fishing quota
.
For these purposes, overseas persons comprise individuals who are not New Zealand citizens and are not ordinarily resident in New Zealand, and companies that are either incorporated outside New Zealand or have 25% or more foreign ownership.
Branch Office
A branch means the New Zealand operations of an overseas company. It is not a separate legal entity. The company incorporation is still held under another country’s jurisdiction, but the New Zealand operations are governed by New Zealand law.
Part XVIII of the Companies Act 1993 (sections 332 to 337) allows overseas companies to establish and register a branch operation in New Zealand on the overseas register.
Australian companies wishing to register a branch in New Zealand benefit from an information sharing arrangement between the Companies Office and ASIC. Registration is cheaper (if done online) than for companies from other countries, and you are only required to provide in your application the company’s Australian Company Number (ACN), together with the following New Zealand-specific details:
- An active email address
- The name reserved for the company with the Companies Office (this must be identical to the company’s name as it is registered with ASIC)
- Physical addresses of the company’s principal place of business in New Zealand and person(s) authorised to accept service in New Zealand, and
- An address (postal or physical) for communications (with the Registrar).
Australian overseas companies also benefit on an ongoing basis from reduced compliance requirements. For example, they need only file a simplified annual return, with ASIC supplying the Companies Office on request with the relevant information filed by the company in Australia.
Liability
A New Zealand branch (being legally the overseas company) bears directly any liabilities that it may incur under New Zealand law. There is no sheltering of liability behind a different legal persona. Establishing a special purpose company as the branch may help ring-fence this liability. In practice, however, limited liability may be illusory, unless the subsidiary is of substance in its own right, any significant commercial dealings may need to be guaranteed by the overseas parent.
Tax
A New Zealand branch of an overseas company will generally be considered non-resident for taxation purposes.
Annual accounts
A New Zealand branch of an overseas company must file two separate sets of audited financial statements, one for its worldwide operations and one for its New Zealand business.
The Process of Registration
An overseas company wishing to register a branch in New Zealand must reserve its name with the Registrar of Companies and file a registration application within ten working days from the start of business.
The application must include:
- The names and current residential addresses of the directors of the overseas company
- The address of the overseas company’s main place of business in New Zealand
- Evidence of the overseas company’s incorporation and a copy of the instrument constituting or
- Defining its constitution (in English), and
- The name and address of at least one person in New Zealand who is authorised to accept service of documents on the company’s behalf.
Check and Reserve Company Name
The first step is to reserve the company’s name. This is an online process undertaken via ONECheck or RealMe on the Companies Office website. It is a relatively simple, speedy and low cost procedure.
ONECheck is an online search tool that combines a company name, domain and trademark search all in one place. It is designed for people who are looking at starting a new business, renaming their current business or just wanting to check their existing business name is secure. ONECheck packages all the relevant information in one place, so you don’t have to work from three different websites. ONECheck can do all the registering of your company name for a fee, or can be used just to check if the name is available (then use RealMe – see below – for registering a company name).
- RealMe
To go via the Companies Office: you will need to get a RealMe username and password from this site.
This site is where to register all of the company’s forms.
Cost: 10.22 NZD
Time: 2 hours to get approved. Must use this name within 20 days after approval
Using the same username and password on RealMe from registering the company name add in the below information to register a Branch Office in New Zealand.
- The names and current residential addresses of the directors of the overseas company
- The address of the overseas company’s main place of business in New Zealand
- Evidence of the overseas company’s incorporation and a copy of the instrument constituting or
- Defining its constitution (in English), and
- The name and address of at least one person in New Zealand who is authorised to accept service of documents on the company’s behalf.
Cost: $160.22 NZD
Time: 1 Hr to be registered on the overseas companies register.
Limited Partnership
From an investor’s perspective, a limited partnership provides the limited liability protection of a company and some of the flow through tax and confidentiality advantages of a partnership. The New Zealand limited partnership model is broadly comparable to limited partnerships in other jurisdictions, including Delaware, Australian states and the Channel Islands. The following issues may be relevant in deciding whether to establish a limited partnership.
Liability
Like a company, a limited partnership is a separate legal entity from its investors; which separation helps to protect those investors from losses and claims arising from the business activities of the limited partnership.
- Limited partners are passive investors and their liability is typically limited to the capital they agree to contribute, provided they do not take part in the management of the limited partnership.
- The general partner manages the business and is responsible for the debts and obligations of the limited partnership if the limited partnership itself cannot meet them. A general partner may be a company.
Register the Partnership
Registering a partnership is an online process undertaken via the Companies Office website. Apply to register a Limited Partnership by completing the prescribed form (Form LP1).
The application form requires the following information to be given:
- The proposed name of the Limited Partnership
- The certification from a general partner/agent that the partnership agreement complies with the Limited Partnerships Act
- Details of its registered office, address for service, postal address and email address
- Details of the General Partners
- Details of the Limited Partners
- Full name, postal address, email address, telephone number and facsimile of the presenter.
Note: Limited Partners details will not be made publicly available on the Limited Partnerships Register. Each application must also be accompanied by a prescribed form of consent signed by every General Partner or that person’s agent authorized to do so in writing, consenting to be a General Partner
The online system is called RealMe. You will need to access the site to register all companies’ forms by registering a RealMe username and password.
Overall it is a relatively simple, speedy and low cost procedure. Once the application is processed, an incorporation application is filed containing particulars of partners, including addresses, and the name of the partnership.
Cost: The filing fees for establishing a limited partnership electronically are $270.00 NZD.
Time: 1 Hr to be registered on the overseas companies register. Maybe longer time to find partner and sign agreement
Subsidiary Company
A subsidiary company is like a ‘child’ that is a wholly owned subsidiary of a ‘parent’ (overseas company). You can establish a wholly owned New Zealand subsidiary by registering a New Zealand company with 100% shareholding held by the overseas company.
Filing requirements
The Registrar of Companies maintains a file for each company registered in New Zealand. This records addresses, shareholders, directors and certain other information in relation to the company. This information must be updated annually, is available publicly and can be accessed online using the RealMe username and password.
A “large” company incorporated in New Zealand that is 25% or more controlled by non-residents must file audited financial statements with the Registrar of Companies. There is no requirement to file the financial statements of an overseas parent company. Generally, the financial statements must be filed within six months of the company’s balance date. This may be extended in limited circumstances.
Dissolution and insolvency
A solvent company may be removed from the company register by a process known as a “members voluntary liquidation”. This requires the shareholders to appoint a liquidator, generally a suitably qualified accountant, who takes control of the company, discharges its liabilities and distributes the surplus to shareholders.
A strike-off mechanism is available whereby the directors or shareholders may simply request the Registrar of Companies to remove the company from the company register. However, such a mechanism should only be employed after obtaining appropriate professional advice due to the issues that arise, including residual exposure to creditors.
A company is not allowed to trade while it is insolvent (liabilities exceed assets). The directors of an insolvent company should seek advice from an insolvency practitioner or a lawyer regarding their options. These include:
- Receivership
- Creditors compromise, being a legally binding agreement entered into by all of the company’s creditors
- Voluntary administration
- Liquidation
Registration
All the steps can be done at the same time using RealMe, which saves time and effort as you receive all the documents to run your company in New Zealand. Note they are broken up into separate steps for reference.
The steps to register a subsidiary company are as follows.
Checking and Reserving Company Name
The first step is to reserve the company’s name. This is an online process undertaken via the Companies Office website. It is a relatively simple, speedy and low cost procedure. It can be done via the Companies Office (RealMe) or via ONEcheck. ONECheck can do all the registering your company name for a fee or can be used just to check if the name is available then use RealMe see below for registering a company name.
ONECheck
Using ONECheck is an online search tool that combines a company name, domain and trade mark search all in one place. It is designed for people who are looking at starting a new business, renaming their current business or just wanting to check their existing business name is secure. ONECheck packages all the relevant information in one place, so you don’t have to work from three different websites. This site can be used to check if a companies name is available in New Zealand before you use RealMe to register the name.
RealMe
To go via the Companies Office: you will need to get a RealMe username and password to register all companies forms.
Time: 2 hours to get approved, and must incorporate with this name within 20 days after approval
Cost: $10.22 NZD
This is done on the same website with the same username and password through RealMe. It is a one-stop shop to register name and company details. RealMe is also used in the future to add any changes to the company so when creating RealMe password and username make sure it is retained for future use.
Cost: $160.22 NZD
Time: 1 hr receiving via email your documents of incorporation and New Zealand Business Number (NZBN).
Lodge Director and Shareholder Consent Forms
The final step is the lodging of signed director and shareholder consent forms. It is not mandatory to lodge a formal constitution. In the absence of a formal constitution, a company is regulated by the constitutional provisions of the Companies Act 1993.
Note:| Overseas companies are not required to file director or shareholder consent forms.
A formal constitution may add to or vary those Companies Act provisions and accordingly, that option should be considered having regard to the company’s particular circumstances.
Management and officers of a company incorporated in New Zealand must have at least one shareholder and one director. A director must be an actual person and may also be the sole shareholder. There is no requirement to have a New Zealand resident director or shareholder, nor is there a requirement to appoint a company secretary.
Minimum capital/capital maintenance: There is no restriction on the size of a company’s capital. The shares of companies incorporated in New Zealand do not have a par value. At the time of any issue of shares, the director(s) must be satisfied that the consideration for and terms of issue of the shares are fair, and pass a resolution and sign a certificate to that effect.
Cost: N/A
Time: N/A
To register for employment tax and welfare, you can apply for a company IRD number (unique identification number from the NZ Inland Revenue), this is done by registering as an employer and register for GST when you incorporate your company online with the Companies Office.
Once the incorporation process is complete, you will receive the company’s certificate of incorporation and your IRD/GST number at the same time. Your employer registration pack will be sent to you within ten working days of receiving your IRD number.
| Note: | You are required to provide the IRD number of all New Zealand resident individual shareholders as well as the IRD number of each New Zealand resident director. |
Time: 1 day (can be combined with previous steps?)
Cost: No charge
The primary activity of a business is classified using a Business Industry Description and a corresponding Business Industry Code (BIC). Just start typing in a description that you think is right for your business. Then from the drop-down list choose the appropriate description and corresponding code.
The Business Industry Description classifies the main activity your business is involved in and for each Business Industry Description there is a corresponding Business Industry Code. This is the code that you supply to government departments.
The format of this Business Industry Code is seven characters, one alpha and six numeric digits.
Outsourcing Employment Through a GEO Employer of Record Service
Whether to incorporate in New Zealand, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.
If the company intends to have staff in New Zealand they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where
- the company is looking to setup an office quickly
- the company wants to work within a defined budget
- the company wants to limit its initial commitment in New Zealand
- the company needs help with tax, employment, immigration and payroll compliance in New Zealand
The complexity of employment regulations in New Zealand makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.
Shield GEO provides a comprehensive service in New Zealand allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in New Zealand.
Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into New Zealand. Read more about outsourced employment through Shield GEO.
Summary of Setup Steps
Subsidiary Company = (SC) Limited Liability
Branch Office = (BO) Branch Office of Overseas Company
Limited Partnership = (LP)
| SC | BO | LP | Time | Cost (NZD) | |
| Can non-residents be company members? | Yes | Yes | Yes | ||
| Percentage of members who are required to be residents: | 0% | 0% | 0% | ||
| Conduct business across all of New Zealand? | Yes | Yes | Yes | – | |
| Obtain Right / Register Business Name Check | Yes | Yes | Yes | 2Hr (time and cost same for all types of company) | 10.22 |
| Company Registration | Yes160.22NZD | Yes160.22NZD | Yes270.00NZD | 1 hr (online application) | |
| Liability | Company LimitedLiability | Overseas Company has Liability | Limited Liabilityfor partners | ||
| Business number | Yes | No Overseas number | No | ||
| Tax Obligations | New Zealand Tax | File both Overseas financials and New Zealand Tax | For overseas partners tax has to be evaluated due to partnership | ||
| Employing locals possible? | Yes | Yes | Yes | ||
| TOTALS | CompanyTime: 3 hrsCost: 170.44 | BranchTime: 3hrsCost: 170.44 | Partner-shipTime: 3hrsCost: 280.22 |
Conclusion
New Zealand has a relatively deregulated and open economy and is consistently ranked as one of the easiest countries in which to do business, one of the least corrupt, and having one of the highest levels of economic freedom. Due to New Zealand being a small economy they welcome new companies from around the world to help with their isolation by making it easy for foreign companies to come and do business. Its major trading partner is Australia and both countries have a special economical relationship, allowing both nationalities to move and work without the need for visas.
For foreign companies wishing to establish a presence and operations in New Zealand, the most common forms of incorporation are the branch office, through a limited partnership, or by incorporating a New Zealand company (which can nonetheless be 100% owned by foreign shareholders).
Most businesses require no government approval. Overseas companies carrying on business in New Zealand and ‘large’ New Zealand companies that have 25% or greater foreign ownership must register and file audited accounts with the Registrar of Companies. These accounts are filed on public record.
Further consent is required for certain categories of investment in New Zealand by overseas persons in categories such as ‘sensitive’ land, fishing quotas or business assets worth more than $100 million. This process is administered by the Overseas Investment Office (OIO) on behalf of the government.
Related Articles
- New Zealand Employer of Record Overview
New Zealand
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