Guide to open a company in New Zealand
New Zealand is considered one of the easiest countries to set up a foreign business. However, it is important that anyone who is interested in setting up a company in New Zealand is aware of all of the possible options and can make a decision about which entity to form based on the advantages and risks that each option presents.
The knowledgeable experts at New Horizons can discuss each option with you and then assist with all aspects of the registration process for the entity form you selected.
Streamline your entity setup
Limited liability company
A limited liability company, or closed limited company, is a separate legal entity from its shareholders. Foreigners are permitted to own 100% of the shares of a limited liability company. Shareholders are only held liable up to the amount of the contributions they have made to the company’s capital.
In New Zealand, setting up a limited liability company does not have many obstacles. This entity can be established with share capital of only USD $1 with one shareholder, one director and one resident director who lives in Australia or New Zealand. The director must be a natural person and not another business. The director must perform their duties in accordance with the law and the articles of incorporation, called the “constitution” in New Zealand. Annual shareholder meetings are required.
The registration process is conducted with the New Zealand Companies Office and is straightforward. The owners must select a name for the business that is different from all other named businesses in New Zealand. Business owners can use the government website to search whether a name has already been selected. The name must include Ltd at the end of it.
Business owners complete the required application form that is signed by the directors and shareholders and pay a filing fee.
Limited liability companies in New Zealand are not required to file annual financial documents or reports with the Companies Registrar unless they:
- Are an offshore company that is incorporated in another nation and is conducting business in New Zealand
- Issued securities to the public, solicited public investments or solicited public participation in projects
- Are a subsidiary of a legal entity formed in another country
- Has 25% to 50% of shares held by people who are not residents of New Zealand or a company formed in another country or a subsidiary of the company
Once the limited liability company begins conducting business, it must keep financial records. Failing to do so can result in hefty penalties. All records filed with the Companies Office are subject to public inspection.
New Zealand law requires all limited liability companies to maintain an office address in New Zealand, which must be a physical address. They must also have a licensed local registered agent.
The business must obtain a taxpayer IRD number and register for a Goods & Services Tax if it accumulated more than NZ $60,000 in sales and income within the past year or this amount is expected within the next year.
Limited liability companies are considered residents for tax purposes. Corporation tax of 28% is applied to net profits. The goods & services tax is 15%. Shareholders can opt not to take their profits and let the business pay the corporate tax or receive their share of the profits and be taxed as an individual on their personal income tax. Global income might be taxable by New Zealand, depending on the source of the income and whether there is a double tax agreement in place with the country where the income was generated.
Every New Zealand company must file an annual tax return with the Companies Office. If this is not completed, the company can be removed from the national Companies Register.
This type of entity is often formed when a company wants to establish a subsidiary in New Zealand or wants a flexible structure under which it can perform regular business activities. Setting up a limited liability company in New Zealand often takes less than a week, so it is an optimal option for businesses wanting to quickly establish a separate legal entity in New Zealand.
Public limited company
A public limited company or open limited company is similar to the limited liability company. It is often used when the company is planning to finance its operations by raising capital through private or public issuance of stock. This type of structure is created by allowing for the issuance of new shares in the company’s constitution. There are no additional administrative requirements or capital investment other than already provided by the rules for establishing a limited liability company. The corporation tax still applies.
Look through company
A look through company is a business entity in New Zealand that is similar to a limited liability company and has a maximum of five shareholders who are individuals. The business must have at least one New Zealand or Australia resident director. The company is required to disclose information about its shareholders and directors to a public register.
Additionally, the business must submit a special form with the New Zealand Tax Department that allows for legal tax exemption of the company. Owners must include the company’s earnings as part of their personal income.
Foreign investors can only use this type of legal entity if they own less than 50% of the shares or if the company is receiving less than USD $10,000 of foreign sourced income. Otherwise, the company automatically converts to a standard limited liability company, which also applies to existing companies of this nature.
A New Zealand limited partnership can be a viable option when a company already has a local partner that is willing to serve as a general partner. To establish this type of entity, the company must have at least two partners, one of which will serve as a general partner who is subject to unlimited liability against the losses of the company. The remaining limited partners are only liable up to the amount of their contribution to the partnership.
All of the earnings made through the partnership are distributed to the partners at the end of the partnership’s financial year and are subject to income tax. Partnerships must prepare and file annual tax returns. They may also be required to register for goods and services tax.
Another way to establish a business entity in New Zealand is through using a foreign trust. This mechanism allows property such as real estate, shares, securities and expensive property to be transferred by the appointed trustee who manages the trust assets in accordance with the trust’s instructions on behalf of the beneficiaries who receive the earnings generated from the trust assets.
Another option is to register a private trustee company that provides wealth management services to clients and raises and invests funds. This is a type of limited liability company that serves as a trustee.
This type of entity is used to reduce taxes on foreign investments since they are 100% tax exempt as long as the income generated is not distributed to the trust beneficiaries.
A branch office is sometimes established when a business is in a highly regulated industry, such as banking, financial services or insurance. This type of entity can be formed with an independent management team and a corporate bank account in New Zealand. Setup for this entity is similar to establishing a limited liability company. A registered address and a resident administrative agent are required.
The company is required to provide the company register with an annual update regarding the branch’s particular information. It must also file annual audited financial statements that include the branch’s accounts and the parent company’s accounts. Income received through the branch is subject to New Zealand’s corporate tax.
Representative offices in New Zealand are only permitted to engage in market research and the promotion of the parent company’s business. They are exempted from corporate tax in New Zealand and do not register for tax. However, they must still register with the Companies registrar, appoint an administrative agent and submit annual audited financial statements to the proper authorities.
How New Horizons Global Partners can help you
- Preparing necessary applications
- Preparing supplemental documentation needed for incorporation
- Registering with foreign agencies
- Registering for a taxpayer id number
- Registering your company name
- Advising you on taxing requirements