A Guide to Starting a Business in New Zealand
If you are a foreign national looking to start a new business in the country of New Zealand, the road ahead can be quite smooth. New Zealand is known for its low business restrictions, significant monetary advantages, and high levels of regulatory efficiency and transparency. New Zealand’s government has armed local and foreign entrepreneurs with a rich technological and physical infrastructure.
The entire business setup process – from reserving the company name right down to incorporation – can be executed online within mere hours. Furthermore, foreigners can turn to the INZ (Immigration New Zealand) and apply for visas that will allow them to stay in the country for a time period ranging from six months to two years, during which time they can work on their venture. Foreign companies can get themselves registered through New Zealand’s Companies Office Overseas Register.
Here, we will be detailing all the steps required to get your company up and running in New Zealand as a foreign national, as well as explore some of the reasons that make New Zealand such a desirable business destination for foreign investors.
Steps required for starting Your New Zealand Business as a Foreign National:
1) Applying for a residential or entrepreneurial work visa:
As previously mentioned, foreigners looking to start a business in New Zealand will be required to apply for either a residential or an entrepreneurial work visa through the INZ. Note that there are two kinds of entrepreneurial work visas, and your current business stage will determine the right one for you:
- If you are looking to launch a venture, you can go for a visa for a length of six months.
- If you already have an NZ business that is experiencing steady growth, it is possible to obtain a visa that allows you to remain in the country for a two-year period.
The criteria for obtaining a New Zealand visa are:
- Working capital of at least NZ$ 100,000.
- At least 120 grading system points (the number of points you accumulate will depend upon how successful your business is and the contributions it makes to the New Zealand economy).
- A track record that is entirely clean (for instance, you should not have a track record of winding up or fraud).
If you plan to run your business by settling in New Zealand, you should apply for a residential visa instead of an entrepreneurial work one. However, you should remember that residential visas have relatively higher and more stringent prerequisites.
If you are unable to meet the requirements for a visa for a two-year period, you might be able to apply for a six-month visa, if you can fulfill the following criteria:
- A minimum investment of NZ$ 500,000.
- Provision of no less than three permanent employment opportunities to New Zealand’s residents or citizens.
Before filing your visa application, make sure to visit the INZ’s website and check the requirements, as they tend to change according to government regulations.
2) Selecting the business structure and name:
Before you can get your business registered, you will be required to pick a legal structure as well as a name for your new venture. There are certain requirements you will need to adhere to while looking for a business name – for instance, your business should not have a name that is identical or similar to the name of another business that is already in operation. You can use either the Companies Office Website or ONECheck to see your desired business name’s availability. OneCheck actually allows you to do one better by letting you reserve web domains, social media usernames, and trademarks, in case your chosen name is available.
It is also important to take steps to protect the business brand and name, particularly if you plan to expand operations. Getting your trademark registered through New Zealand’s Intellectual Property Office (IPO), you will be able to safeguard your logos, words, colors, shapes, smells, and sounds.
While there are numerous business structures you can pick from, the most common ones are:
Setting up a company under the sole trader structure is easy and inexpensive. However, under this structure, you can be held personally liable for your business debts. Another disadvantage is that sole traders usually face larger barriers while trying to arrange funds for expansion or growth.
A partnership business structure is further divided into general and limited. A general partnership is much easier to establish and operate, and also offers greater capital access and borrowing capacity when compared to sole traders. Limited partnerships are separate legal entities, thereby helping to limit the partners’ liability to the amount that they invest in the business. This structure means that the business is the owner of its liabilities and assets, and will be held responsible for all debts.
Companies are the most expensive and complicated structure to establish, owing to the stricter legal and tax regulations that it is subject to.
3) Registering the business:
Steps to take before applying:
Before you can file the application for your business registration through the Companies Office Overseas Register, your company name will have to be reserved. Naturally, this name needs to be the one you used at the time of incorporation.
You will also need to provide detailed information about the incorporation and New Zealand business operations for your company. For instance, you will need to provide certified copies of the COI (Certificate of Incorporation). After the company name has been reserved, you can get your company registered online by making fee payments.
The registration process:
The NZBN (New Zealand Business Number) website will register your business as well as provide you with your business number without any charges. Although getting an NZBN is not mandatory, it is associated with several advantages, such as seamless interaction with government agencies and other businesses.
After incorporating a limited partnership or company in New Zealand, it is compulsory to get the business registered through the Companies Office, at which point, you will automatically be assigned an NZBN. You will have to pay a fee to get your company registered.
4) Consider tax implications and other regulations:
It is particularly important that foreign entrepreneurs are familiar with their New Zealand legal obligations prior to initiating business operations. It is recommended that you consult an accountant or a lawyer specializing in business structuring, before deciding on a business structure for your new venture. Every business structure comes with a unique set of tax and legal implications.
A few vital tax obligations include:
- Getting the business registered with the IRD (Inland Revenue) and obtaining a business IRD number.
- Annually filing tax returns and paying the required taxes.
- Making employee salary deductions such as child support, student loan, KiwiSaver, and PAYE, and paying these deductions to the IRD.
- Calculating and paying any provisional taxes.
- Getting your business registered for GST (only applicable for businesses having a turnover of more than NZ$ 60,000).
There are some other regulations specific to certain industries, which revolve around:
- Fair trading.
- Safety and health.
5) Find an accountant and lawyer, and open a business bank account:
You can use any registered bank to start your commercial bank account. Some of these banks also offer services pertaining to overseas transfer of funds.
It is important to seek financial and legal advice before starting off with your New Zealand venture. Every New Zealand lawyer is a member of the New Zealand Law Society, while Chartered Accountants in the country belong to the New Zealand Institute of Chartered Accountants. In case you are running a low or tight budget, make sure to compare multiple fixed-fee quotes and choose accountants and lawyers that are affordable for you.
Reasons to Start a Business in New Zealand:
Numerous foreign nationals go through the above process every year to get their businesses up and running in New Zealand because they are aware of the many benefits that come with it – some of which are:
1) A favorable economic climate:
Despite being considered a small country, New Zealand’s immense growth potential and economic stability have established its status as one of the world’s best entrepreneurial destinations. Despite the COVID pandemic, New Zealand was able to record a healthy 3.3% GDP growth, indicating a steady growth in consumer spending – growth that is not slowing down any time soon. As a foreign entrepreneur, you can get right on the boat and enjoy this economic success wave.
Secondly, New Zealand’s government has always been welcoming of business and entrepreneurial activities. It has always provided comprehensive infrastructural backing for these activities, such as startup grants, inexpensive legal advice, and mentoring services.
New Zealand has also maintained conducive relationships with Asia Pacific countries. For instance, its friendly relations with Australia have resulted in the two countries signing the CERA (Closer Economic Relations Agreement) – a kind of trade agreement that allows either country to access the other’s markets without any restrictions. This offers numerous benefits to businesses of both countries, the most prominent of which is that imports and exports between Australia and New Zealand will not be subject to any tariffs.
2) Simple legal requirements:
Starting a business in New Zealand means that you do not have to worry about dealing with excessive legal or bureaucratic restrictions.
Your chosen business structure will determine the regulations applicable to your venture. Nonetheless, like we mentioned earlier, the process of setting up your New Zealand business is highly convenient and easy, and should not take you more than a few hours.
3) Strong startup community support:
Starting a business as a foreigner means that no amount of support is too much, which means that the importance of a supportive business community cannot be overemphasized. Thankfully, in New Zealand, you will be able to find a like-minded community that is tightly knit. Whether you want someone with whom to discuss ideas, someone to hear you out, or someone for a bit of advice, you will never be disappointed.
4) A lenient tax system:
Unfortunately, taxes are a reality that you just cannot escape, and small businesses are often concerned about the way that taxes will affect their income. Businesses pay income taxes on the net profit that they generate, which depends upon their sold goods or services. Your business tax amount is determined by your annual income as well as your business entity type.
Thankfully, New Zealand’s tax environment tends to be comparatively forgiving. The government offers several tax concessions, including a 6.7% leeway for any individual that is self-employed or operates a partnership. Sole traders and partnerships having an annual income of less than NZ$ 38,000 can benefit from several other rebates.
A healthy and developed economy, lenient taxation systems, strong business support, and easy legal requirements all add up to a business destination that is ideal for both budding and established entrepreneurs. We hope that this guide will help you better understand the advantages that you can enjoy by starting a business in New Zealand, as well as familiarize you with the (relatively straightforward) process that you will have to undergo before initiating your New Zealand venture.
To further explore your business options in New Zealand, please feel free to reach out to us.