RSM New Zealand

Investor Category Resident Visa - FAQ's

New Zealand's success in eliminating community transmission of the Covid-19 virus has made it a very attractive country for those interested in relocating their families to a safer home. This has increased the value of a New Zealand passport.

The Investor Category Resident Visa is a straightforward pathway for residence which has traditionally attracted a number of entrepreneurs and investors wishing to immigrate to New Zealand. The policy allows the New Zealand economy to benefit from the wealth of successful individuals, whilst at the same time providing those candidates a pathway to residency and citizenship.

In association with McVeagh Fleming, we have prepared an FAQ below which covers the most commonly asked questions relating to this category.  

Question - What is the Investor Category and how do I qualify?

Answer - To apply under the Investor Category an applicant must demonstrate that they have sufficient funds to invest in New Zealand. There are two types of visa applications under this category: Investor 1 and Investor 2.

They are primarily differentiated by the amount required to be invested.

  • Investor 1 requires an investment of $10 million NZD over a period of three years.
  • Investor 2 requires a minimum investment of $3 million NZD over a period of four years and the applicant must also demonstrate a minimum of three years of business experience.

All applicants must also meet health and character requirements and be fit and proper persons.

The application process is very different for each category. With the Investor 2 Category requiring an expression of interest (EOI) by the applicant and a subsequent invitation from Immigration New Zealand. The invitations are issued based on the number of points claimed in the EOI, with all applicants being ranked according to their total points claim. As per current policy, up to 400 applications can be approved under this category each year.

Applicants under the Investor 1 Category do not need to submit an EOI. If an applicant meets health and character requirements, is able to nominate $10 million NZD and demonstrate that the funds were lawfully earned or acquired, an application can be lodged at any time.

Question - Who is a 'fit and proper person'?

Answer - According to immigration policy, you must be a fit and proper person in order to submit an application under this category. This is defined in policy as someone who meets the following requirements:

  • Has complied with all relevant immigration, employment and tax laws in respect of all businesses they have exercised significant influence over;
  • Has no convictions relating to their business dealings or for offences involving dishonesty.
  • Has never been involved in business fraud or financial impropriety.

Question - How do you claim points in an Investor 2 EOI application?

Answer - Points are allocated for various factors, including age, length of business experience, English language test score, nominated investment amount and whether the applicant is proposing to invest in a growth investment.

We will need to review your personal circumstances to advise how many points you are eligible to claim and whether this is sufficient for you to be invited to apply by Immigration New Zealand.  The number of points required for an applicant to be invited to apply will vary, depending on the number of EOIs in the pool at the time. You will be ranked according to the other applicants in the pool at the same time as you. EOI selections are made every two weeks.

Question - Is there an age limit to apply under this Category?

Answer - There is no age limit to apply under the Investor 1 Category.

However, to qualify under Investor 2, you must be aged 65 or younger at the time of your application.

Question - Do I need to meet English language requirements?

Answer -  Under the Investor 2 Category, you must meet minimum English language requirements. The minimum required is an overall score of 3.0 or more in IELTS (General or Academic). Any partner or dependent child included in your Investor 2 application must also meet minimum standards of English or pre-purchase ESOL tuition.

Question - Can you give me a quick overview of New Zealand’s tax system?

Answer - New Zealand operates a broad base tax system that includes comprehensive income tax and goods and services tax (GST). There is currently no stamp, gift or estate duties in New Zealand making it an attractive investment destination. Currently New Zealand does not have a general capital gains tax (CGT).  However, specific CGT may apply to certain disposals of land and personal property (e.g. shares).

New Zealand generally taxes income based on source and residence. New Zealand residents are assessable on worldwide income (subject to any exemption or exclusion). Non-residents are generally only taxed on New Zealand-sourced income. New Zealand operates a progressive tax system and our current top personal tax rate is 33% and it applies to income over NZ$70,000.

New Zealand tax system requires taxpayers to self-assess their income tax liabilities. Consequently, taxpayers are responsible to the tax positions they undertake. Any tax shortfall arising from an incorrect tax position can result in civil and criminal penalties. The Commissioner of Inland Revenue is responsible for administration of the tax system and may issue default assessments or assessments after investigations.

Question - Do I become a tax resident once I’ve been granted a New Zealand resident visa under Investor I or Investor II categories. 

Answer - The short answer is maybe.  This is because the criteria to determine whether a person is a New Zealand resident for tax purposes is different to the criteria for immigration purposes under the Investor I or Investor II categories.

To meet the immigration requirements, an individual needs to be presence in New Zealand for 146 days in each of the last three years of a four year investment period or 44 days in each of the last two years of a three year investment period under the Investor II category. These day-count tests can be even more flexibly depending on the make-up of your investment.

However, for tax purposes, an individual will be treated as a New Zealand tax resident under two tests: the day-count test (also referred to the 183-day test) and the permanent place of abode test.

Briefly, an individual is a New Zealand tax resident if they are personally present in New Zealand for more than 183 days in total in any 12-month period. The person will then be treated as tax resident from the first of those 183 days. A person is also resident if they have a permanent place of abode in New Zealand, even if they also have a permanent place of abode elsewhere. A person who is resident by virtue only of the 183 day test will stop being a New Zealand resident if they are personally absent from New Zealand for more than 325 days in total in any 12-month period. The person will then be treated as not resident from the first of those 325 days.

The term “permanent place of abode” generally refers to “a place where a taxpayer habitually resides from time to time even if they spend periods of time overseas”.  The permanent place of abode test is a very wide test.  While a person must have a place of abode (i.e. a dwelling) in New Zealand to have a permanent place of abode here, the test also extends beyond this and takes into account a person’s ties with New Zealand, including the time spent in New Zealand, employment arrangements, and other social, personal and economic ties with New Zealand.

The permanent place of abode test is the overriding residence rule for individuals. This means that a person who is absent from New Zealand for more than 325 days in a 12-month period will remain a New Zealand tax resident if they continue to have a permanent place of abode in New Zealand. Equally, a person who is present in New Zealand for less than 183 days in a 12-month period remains a New Zealand tax resident if they have a permanent place of abode in New Zealand. A person who is absent for more than 325 days in a 12-month period, but who has a permanent place of abode in New Zealand at any time during that period, will not cease to be tax resident any earlier than the day they lose their permanent place of abode in New Zealand.

Depending on your circumstance, you may or may not become a New Zealand tax resident under New Zealand tax law when you are granted a residence visa under the Investor categories. It is important that you consult with your advisor to determine your tax residency status.  You should understand the advantages and disadvantages of becoming a New Zealand tax resident, taking into account your worldwide tax position and obligations.  Some advanced planning will also be required to ensure that you meet your tax obligations in New Zealand (and other countries) efficiently. 

For completeness, in order to buy a home in New Zealand, you are generally required to be an ordinary resident here or have a consent from the Overseas Investment Office (OIO). The residence criteria for OIO purposes are again different to the residence test for tax or immigration purposes.  Please consult your lawyer if you require further information on this matter.

Question - What is the consequence if I become a tax resident in New Zealand? Is my overseas income taxable in New Zealand once I relocate here?

Answer - If you become a tax resident in New Zealand, your worldwide income will generally be assessable in New Zealand (subject to any exemption, exclusion or tax treaty relief). You may be entitled to a credit for foreign income tax paid on foreign-sourced income. If you happen to be a dual resident of New Zealand and another country, the provisions of the Double Tax Agreement (DTA) between New Zealand and the other country are particularly significant for obtaining tax relief.

Current New Zealand income tax rates applying to individuals are as follows:

  • 10.5% for income up to NZ$14,000 per annum;
  • 17.5% for income between NZ$14,001 and NZ$48,000 per annum;
  • 30% for income between NZ$48,001 and NZ$70,000 per annum; and
  • 33% for income in excess of NZ$70,000 per annum.

Question - What are some of the acceptable investments under this category?

Answer - Immigration policy lists a number of acceptable investments for those interested in applying for this visa. These are:

  • Bonds issued by the New Zealand Government, local authorities, New Zealand firms traded on the NZDX, New Zealand registered banks, New Zealand firms with at least a BBB- or equivalent rating from internationally recognised trading agencies.
  • Equity in New Zealand firms (public or private including managed funds and venture capital funds)
  • Equities in New Zealand registered banks
  • Residential property development
  • Commercial property
  • Bonds in finance companies
  • Eligible New Zealand venture capital funds
  • Philanthropic investment
  • 'Angel funds or networks' investments

We recommend that you discuss how to structure your investment portfolio with an investment adviser and an immigration lawyer to ensure it is suitable for your circumstances.

As different types of investments may have different tax implications in New Zealand or overseas. You should also consult your tax advisor when structuring your investment portfolio.

Question - What tax exemptions are available in New Zealand for new migrants, if any?

Answer - The most significant tax relief for new migrants under New Zealand tax law is likely to be the transitional resident exemption (TRE). If a person is a transitional resident, they are generally exempt from New Zealand income tax on their foreign-sourced income (such as overseas dividend, interest, rent, financial arrangement income, etc.) except where that income relates to their employment or services they perform in New Zealand and overseas. 

This exemption is generally valid for 48-months after the month in which the person becomes a New Zealand tax resident under New Zealand tax legislation. 

If you are a dual resident, significant tax reliefs could also be available under the DTA between New Zealand and the other country.  New Zealand currently has DTAs with 40 trading partners.

We recommend that you seek further advice on how the TRE exemption and DTA reliefs could apply to you.

Question - Am I still subject to New Zealand tax if I am a non-resident for tax purposes?

Answer - A non-resident is usually only liable for New Zealand tax on income derived from New Zealand or having a New Zealand source, although DTAs could provide significant tax reliefs or exemptions in some circumstances.

Examples of income that is treated as having been derived and therefore subject to tax in New Zealand include:

  • Income derived from any business wholly or partly carried on in New Zealand has a source in New Zealand;
  • Income derived from contracts made in New Zealand or contract that is wholly or partly performed in New Zealand;
  • Income derived in New Zealand in connection with a person’s employment;
  • Income derived from the ownership of land and use of any personal property in New Zealand; and
  • Dividend or interest derived from equity or debt investment in New Zealand;

We recommend that you discuss with your adviser the tax treatment of all types of income you are likely to derive in New Zealand along with any tax reliefs or exemptions available.  

Question - How do I get my money to New Zealand?

Answer - Immigration New Zealand will only accept funds which are transferred through the banking system into an applicant's bank account in New Zealand. They also accept transfers through a foreign exchange company which transfers funds through the banking system.

An applicant is generally granted 12 months to transfer the funds to New Zealand.

If you are interested in this category it is important to discuss your personal circumstances with an immigration lawyer/accountant to ensure you are provided advice specific to you.

Please direct any enquiries to:

Ramya Sathiyanathan (Immigration Lawyer) on (09) 306 6727 ([email protected]).

Ivy Chen (Certified Practising Accountant) on (09) 666 0794 ([email protected])

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Authors

Ivy Chen 陈霓绚
Principal Tax/China Practice