New Zealand’s Golden Visa
A PATH TO PERMANENT RESIDENCY AND CITIZENSHIP
If you are a creator of new wealth; or preserver of old, you’ll have skin in the game of finding ways of building or preserving wealth. Success is awarded to those that are opportunist and strategist. They are always forward thinking and recognise that the world is dynamic, and make the most of opportunities when they arise.
On such opportunity is New Zealand’s golden visa. It would benefit worldly high net worth individuals and their families who are looking for a quick and easy route to permanent residency without having to spend too much time in this remote yet developed part of the world. You can still carry on with your life and business in your home country and have New Zealand as a backup plan should the need arise, unless of course you’re attracted to the idea of living in the land of the white cloud and want to make it your home.
There are two optional routes when applying for New Zealand’s Active Investor Plus Visa, Growth and Balanced category.
ACTIVE INVESTOR PLUS VISA
Growth Category
This requires a minimum investable amount of NZ$5m (approximately US$2,815,500 exchange rate may vary).
This amount must be invested in either managed funds; or in direct investments, restricted to New Zealand.
They must be retained in these acceptable investments for 3 years; and
At least 21 days must be spent in New Zealand over that time frame.
Reviews by the appropriate authority will take place at the 24-month anniversary and 36-month anniversary mark.
Funds must be nominated before the application is approved and transferred and invested within six months (with an option to apply for one further extension of a further 6 months) from initial approval of application. A one off request can be made to change to the balanced category.
Balanced Category
This requires a minimum investable amount of NZ$10 (approximately US$5,631,000 exchange rate may vary).
This amount may be invested in bonds (Government; local government or corporate); listed equities; philanthropy; or property development (new residential or new/existing commercial or industrial).
They must be retained in for 5 years; and
At least 105 days must be spent in New Zealand over the investable period. However, the days of stay can be reduced if the investment amount is increased by (NZ$11m-91 days reduction; NZ$12m-77 days; $13m 63 days).
Reviews by the appropriate authority will take place at the 24-month anniversary and 60-month anniversary mark.
Funds must be nominated before the application is approved and transferred and invested within six months (with an option to apply for one further extension of a further 6 months) from initial approval of application. A one off request can be made to change the growth category.
The applicant can include their partner and dependent children under the age 24 years, including newborns in their application. There is no age restriction nor English-speaking requirement; however good health is required.
After the requisite period of stay and investment, permanent residency is granted whereby a person may live and travel in and out of New Zealand indefinitely. Citizenship is only granted where a person has been present in New Zealand for 240 days in each 12-month period or 1,350 days over 5 years. As of 1st February 2020, New Zealand citizens had visa free entry or visa upon arrival access to 184 countries.
BEFORE YOU TAKE UP RESIDENCE IN NEW ZEALAND
Should you wish to stay long term in New Zealand, here are some things to consider.
New Zealanders’ must pay tax on their worldwide income. A person is considered a New Zealand resident where their permanent place of abode is in New Zealand; or 183 days within a 12-month period is spent in the country.
The tax year is from 1st April- 31 March. Income tax is progressive at marginal rates of 10.5% - 39%. There is no state tax, gift tax, wealth tax, inheritance tax or general capital gains tax except for speculation on real property that is held for less than 2 years for the purpose of making a profit. This does not apply to real property that is the family home or inherited. Tax will apply on foreign debt and equity investments which are acquired with the intention of making a profit. There is no payroll tax, social security tax or general healthcare tax. Social security and health are covered by general tax and private health insurance is optional. A sales tax of 15% applies to most things, and excise tax is imposed on petrol, tobacco and alcohol.
Gains from certain foreign investments do not incur income or capital gains tax but can be taxable on an unrealized basis known as a Foreign Investment Fund (FIF). This applies to direct interest of less than 10% in foreign companies, foreign unit trust, foreign superannuation scheme or a right to benefit from a life insurance policy where a FIF is the insurer, and the policy was not offered in New Zealand. This will be changed in 2025. Certain exemptions to FIF rules apply, including where interest is less than $50,000; shares held in certain Australian companies; or units in certain Australian unit trusts. Exempt Australian shares are treated the same as New Zealand shares, dividend tax is paid only when received and are free from capital gains tax.
There are 7 different methods of calculating individual FIF income and one must be chosen and consistently applied in each tax year. Calculations are made not based on income received but based on overall income and losses derived. The method of calculation in any tax year should be made depending on the performance of the foreign portfolio for a favourable tax position.
An exemption applies where there is 10% or greater income interest and less than 5% in passive income (dividend, interest, royalties, and rent), however CFC rules may apply.
A controlled foreign company (CFC) will be subject to tax in New Zealand if five or fewer New Zealand residents have a controlling interest of more than 50%; or five or few New Zealand residents control shareholder decision rights; or a single New Zealand resident has a controlling interest of 40% or more, and no non associated non-resident owns a larger controlling interest.
Company tax is 28%. A company is a tax resident of New Zealand if it is incorporated in New Zealand or has a head office; or the centre of management or controlling director is in New Zealand.
New Zealand has a network of 40 double tax agreements in force where a taxpayer may claim credit for tax paid in other jurisdictions. This also applies where there is no double tax agreement, but the tax is substantially the same in nature as New Zealand income tax.
TAX FREE PERIOD
A person is automatically considered a New Zealand transitional resident if they have been absent from the country for more than 10 years; qualified as a New Zealand tax resident on or after 1 April 2006; and were not tax resident at any time in the 10 years before they qualified.
A transitional resident is exempt from tax on foreign sourced income for 48 months. However, this does not apply to foreign sourced employment income or foreign sourced income relating to services received whilst living in New Zealand.
Additionally, at the end of the 48-month period, a person who is a settlor of a foreign trust, has an additional 12 months within which to elect classifying the trust as a complying trust. If the settlement of the trust was made when the settlor was not a New Zealand resident, when they do become resident, they are liable for income tax as agent for the foreign trustee. Electing classification as complying trust will incur income tax liability of 39% compared to the default rate of 45% for a non-complying and ordering rules would therefore apply. Once a trust becomes a non-complying trust it can never become a complying trust.
Before migrating to New Zealand, it’s important to plan and decide if the trust should be ring fenced from any future tax liability in New Zealand which your advisor can discuss with you.
INVESTING IN NEW ZEALAND
Land banking has attracted overseas interest. Restrictions are in place for foreigners wanting to purchase sensitive land or an interest in sensitive businesses in New Zealand. Consent is required from the Overseas Investment Office.
Consent is also required for significant business assets over NZ$100m; fishing quotas; purchase of residential land; or development of residential land. This exclusion does not apply to Singaporean and Australian citizens and permanent residents who live in New Zealand. Otherwise, consent is required from the Overseas Investment Office. New builds and commercial property are excluded.
If a person with a resident visa is thinking of purchasing any of the above-mentioned restricted assets, they should ensure that they obtain permanent residency and/or New Zealand citizenship and are living in New Zealand.
IN SUMMARY
New Zealand offers you and your family a wealth of natural splendor; high standard of living away from the increasingly volatile reality of much of the world; effective and respectful governance; a well-diversified OEDC economy with strong fundamentals; and supportive frameworks for entrepreneurs and business in general; excellent education options and a strong healthcare system. With the right planning measures, it can provide you with a private haven for you, your family, and your wealth.
What next? It all starts with a conversation to explore possibilities and cover some questions you may have and from there we build a plan.
The contents of this Insight are generalised, and readers are urged to seek specific advice on matters and not rely solely on this text.
© Vibha Vallabh, Ellora Private Office
Photo by Casey Horner on Unsplash