The world bank advocates New Zealand for the easiest country in the world to do business in 2019. The strong economic and regulatory environment allows the country to provide entrepreneurs and investors, including foreigners, a great opportunity to start their commercial journey.
Migration steps are easy to comply with and the process of establishing, owning and operating your business can be completed through government applications such as online portals. Find out what you need to know in terms of your responsibilities when setting up a business in New Zealand.
Overview: Tax and Accounting in New Zealand
Tax is compulsory in New Zealand, therefore, anyone that earns money in the country has to pay income tax. This includes businesses, contractors and those who are self-employed.
Income tax can be pre-paid. This is known as provisional tax and contributes to annual tax paid in several installments. However, Inland Revenue, the local department that handles tax for the government, notifies the company or the person to do this.
Incorporating a company
When incorporating a company into New Zealand, the company must reserve a company name. The New Zealand Companies Act expresses that a company must have an official registered office address in New Zealand. Therefore, a registered office must be provided however if the new business has not yet got a physical presence in the country. There are solicitors and accountants available to provide the service needed for the growing company.
There must be at least one shareholder with a share capital of NZ$1. In addition, all companies must have a minimum of one director who is a resident in New Zealand or Australia. The Companies Office in New Zealand should be informed of who the company director is with certain accompanying details. Both directors and shareholders must sign a consent form for registration alongside disclosing their date and place of birth which is confidential.
Although adopting a constitution is not compulsory, this is strongly suggested and can be done during the incorporation process or another date.
After registering the new company, the subsidiary must hold annual meetings for shareholders within 18 months, and no later than 6 months following its balance date.
If the company is registered as overseas then a subsidiary will be needed to file an annual return and register it with the Companies Office.
Companies that exceed NZ$60 million, or if the company’s total revenue and their subsidiaries exceed NZ$30 million for the previous two accounting periods, are classed as large companies and must disclose their financial statements publicly.
Additionally, companies exceeding more than 10 shareholders who fail to opt-out in relation to the accounting period, or those companies with less than 10 shareholders who opt-in must declare their financial statements publicly.
Using a Legal Representative
Legal representatives are highly recommended in New Zealand to help a new foreign business or entrepreneur aware of the responsibilities and liabilities that come with having a business in this country.
A legal representative can work externally to or within the business and can help with registration and incorporation, and all further and ongoing compliance requirements for commercial activity in New Zealand.
Corporate income tax in New Zealand rate rests on a flat rate of 28%.
Non-residence companies are simply taxed on their New Zealand sourced income. However, a company that is resident in the country has to have the head office, or main management or company director in New Zealand. You’ll also need to file an income tax return for your company.
Payroll taxes are taxes imposed on employers or employees, a percentage of the salaries that employers pay their staff is calculated.
A business entrepreneur should consider the payroll tax that is correlated with hiring employees. This would also depend on whether the company employs foreign nationals or local New Zealand employees. The foreign company will need to register a branch, apply for an IRD or tax number and then register as an employer with the Inland Revenue. One option for a non-resident company to payroll its employees in New Zealand is to use a fully outsourced service which will employ and payroll the staff on their behalf.
Your employees: personal income tax
A personal tax return applies to income based on wages. If a person is receiving income from overseas or has arrived midway through the tax year which runs from the start of April and promptly runs through to the 31 March, then filing a return is compulsory. A company may be eligible to apply for a non-standard balance date through Inland Revenue to align the tax and accountancy end year.
Income over NZ$60,000 is taxed at 33% where income up to NZ$14,000 income would be taxed at the rate of 10.5%.
Goods and Service Tax
Goods and Services Tax (GST) is a value-added tax or consumption tax for goods and services consumed in New Zealand. 15% tax is applied to the final price of the product or service being purchased.
Non-resident companies may have to register for goods and service tax. Where a company that is carrying on their business can register for goods and service tax at their discretion if there are content with the turnover threshold
Avoiding Getting Double Taxed
Innocently being double taxed in New Zealand and another country as a foreign investor can be a possibility due to defaults in the system. However, this mistake is easy to avoid if you can provide evidence of credit for tax paid overseas on an income that is also subject to the New Zealand Tax.
There are, however, agreements in place with 39 trading and investing partners of New Zealand to avoid double taxation incidents occurring.
Contact us for help
To learn more about the business opportunities to form a company in New Zealand, and how you might take advantage of these political shifts, please contact us today.