Legal Considerations When Doing Business in New Zealand

Comfortably tucked away on the bottom right-hand side of the world map, New Zealand may not be the first country you consider when planning international business expansion, but it is becoming an increasingly popular choice amongst savvy entrepreneurs. Indeed, as markets continue to saturate and competition increases, it makes sense to expand into a country that has a booming import and export market and several important trade links with other nations.

But in order to successfully expand into the country and make a success of your venture, it is important to understand New Zealand business law. Below, we’ve rounded up the biggest legal considerations to take into account and offer some advice for foreign investors…

Legal Considerations for Foreign Investors

Legal Considerations Doing Business New Zealand

New Zealand’s market is relatively unregulated, and foreign investment is encouraged by the government in a whole host of industries.

As a foreign investor, it’s good to know that New Zealand’s market is relatively unregulated, and foreign investment is encouraged by the government in a whole host of industries. Only investments that are related to sensitive land, require a fishing quota or involve assets of more than US$100 million require government approval, which can be submitted to the Overseas Investment Office (OIO). Working with an experienced back-office provider will ensure your application is approved, as they can guide you on the most important business regulations.

If you’re operating a Branch Office or you have incorporated a large company and foreign ownership is above 25%, you’ll need to submit financial statements for annual audits, before they are submitted to the Registry of Companies. This is to prevent corruption and ensure that foreign entities are operating fairly and legally in the country. Finally, it’s good to know that foreign exchange controls in the country are lax, although you must declare any transfers above NZ$10,000 when moving funds from New Zealand to your home country.

It’s important to note that New Zealand exchanges information with foreign authorities and reports information on your company assets and earnings, in a bid to reduce tax evasion – therefore, it is critical that you keep your accounts up-to-date both in New Zealand and in any other countries you operate in so that the figures match up, or you could be investigated.

Reporting Business Affairs

Whether you’re operating a Branch Office or a Company in New Zealand, you must appear on the Companies Register and provide your address and the identity of your shareholders and company directors in a bid to increase transparency; this should be kept up to date with an annual return filed to the Companies Office, where you’ll need to pay a small renewal fee.

Companies operating in New Zealand are required to keep records of all business income and expenditure for accounting purposes and file their financial statements to the Inland Revenue Department once per year. If businesses do not generate more than US$24,000 in income, they can self-assess their tax return and do not need to file their financial accounts.

Legal Considerations Doing Business New Zealand

Although New Zealand no longer has import licenses for businesses, it does impose tariffs on certain goods.

Regulations When Importing Goods

Although New Zealand no longer has import licenses for businesses, it does impose tariffs on certain goods, depending on the category of the items and their country of origin. For example, some medicines and health supplies from some countries are outright banned in an effort to avoid unsafe supplies/goods entering into the country, affecting public health.

Trading Regulations

There are a number of important trading regulations and legislation to follow in New Zealand:

  • Advertising: New Zealand imposes fixed penalties for businesses that mislead or make false claims in advertising, use ‘bait’ advertising, or add fees that are hidden in the small print. All goods and services should be advertised fairly, or you may be subject to a fine of US$500,000 and be asked to refund all affected customers.
  • Pricing: Pricing rigging/fixing is illegal in New Zealand, and businesses can be fined millions if they are caught doing so by the New Zealand Commerce Commission.
  • Merging: If you’re planning to merge or acquire a company in New Zealand, you must first receive approval from the New Zealand Commerce Commission, who will review your case to ensure the market remains free, fair and competitive for all.
  • Fair Trade: Under the New Zealand Fair Trading Act, all businesses must avoid using harmful/deceitful practices and treat customers fairly and with respect.

Regulation for Financial Services Companies

Companies operating in the financial services sector will appear on a separate company register, where citizens can view the services a company offers and information about its shareholders and directors. Such companies must also register with a dispute resolution scheme that has been approved by the government, setting out how to resolve disputes between customers and the financial provider, in an effort to streamline the process.

It is important to note that regulation in the financial services sector is right and is enforced to the letter. As such, it can be expensive to set up a business in the sector and be compliant, which is why we recommend working with an expert New Zealand business law firm to receive the necessary guidance and support before incorporating your firm.

New Zealand Employment Laws and Considerations

When expanding your business into a new market, human resources are incredibly important. As well as offering employees a fair salary and working environment, you must comply with the following laws and regulations to ensure their safety and protect your business from claims.

  • Minimum wage: In New Zealand, the minimum wage for full-time employees is US$1,099 per month for under 19s, and US$1,727 for every other employee.
  • Leave and Sick Pay: All employees in New Zealand should be given 11 days of paid public leave and five days of sick leave per year. This increases to ten days of sick pay per year after a year of continuous employment. As a company director, it is your responsibility to keep records of all leave granted, both holiday leave and sick leave, should a dispute arise down the line. Automating the process with HR makes sense.
  • Dismissal: Should you wish to dismiss an employee from your organization, you should give employees one month of notice and written reasons why. If you do not, you could face a personal grievance claim and have to justify your decision in court.
  • Insurance: Employers, by law, make contributions to the Accident Compensation Fund, which is currently up to 3% of their salary. The good news, though, is that you do not have to offer health insurance or benefits, as these are already covered under the country’s Social Security system, reducing your employee overhead costs.
  • Contracts: In order to protect yourself and your employees, you should issue all employment contracts in writing and keep them on record, and record hours worked by an employee, any time off, and their wages and dates in which these were paid.
  • Discrimination: As is the case in the majority of modern countries, it is illegal to discriminate against an employee based on their race, religion, age, sexuality, or gender. Working with a recruitment expert can reduce the chances of personal bias.

Let Biz Latin Hub Help

Navigating the complex legal environment in New Zealand or any other foreign market can be challenging for a foreign investor, which is why we recommend working with a reputable, experienced back-office services company.

Biz Latin Hub offers a range of services for firms looking to expand into New Zealand, including company incorporation, due diligence, accounting, and recruitment. To find out more, contact the team today

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