NZ International Trade Update

Free Trade Agreements in Force

New Zealand is focused on fostering relationships in the Asia Pacific, and achieves this through entering into free trade agreements.  New Zealand currently has the following free trade agreements:

  • New Zealand–Hong Kong, China Closer Economic Partnership
  • New Zealand–Malaysia Free Trade Agreement
  • ASEAN–Australia-New Zealand Free Trade Agreement
  • New Zealand-China Free Trade Agreement
  • New Zealand-Thailand Closer Economic Partnership
  • New Zealand-Singapore Closer Economic Partnership
  • Australia-New Zealand Closer Economic Relationship
  • Trans-Pacific Economic Partnership (P4) Agreement

Trans-Pacific Partnership Negotiations

New Zealand entered into the ‘Trans-Pacific Strategic Economic Partnership (P4) Agreement’ (P4 agreement) with Brunei Darussalam, Chile, and Singapore (the Pacific 4).  The P4 agreement, which came into force in 2006, immediately removed most tariffs on goods traded between the member countries, and the remaining tariffs are being phased out.  The P4 agreement also aims to:

  • encourage expansion and diversification of trade amongst each party’s territory;
  • eliminate barriers to trade in, and facilitate the cross border movement of goods and services among the territories;
  • promote conditions of fair competition in the free trade area;
  • substantially increase investment opportunities among each party’s territory
  • provide adequate and effective protection and enforcement of intellectual property rights; and
  • create an effective mechanism to prevent and resolve trade practices.

Furthermore, the P4 agreement seeks to support the wider liberalisation process in the Asia-Pacific Economic Cooperation (APEC) forum, consistent with its goals of free and open trade and investment.

In September 2008, the Pacific 4 parties announced their agreement with the United States to commence negotiations for an expanded P4 agreement to provide for investment flows and financial services, both of which are not covered by the current P4 agreement.  Since the negotiations commenced, Australia, Canada, Japan, Malaysia, Mexico, Peru and Vietnam have joined the negotiations.  Round 18 of the negotiations will take place in Malaysia from the 15 to 25 July 2013.

Clendons’ Guide to Business in New Zealand

Our November 2012 introductory guide to business in New Zealand outlines important features of the laws relevant to conducting business in New Zealand.  Please refer to the attached introductory guide if you want to read more.

If you have any questions on the matters discussed in this update please contact:

Brian Joyce


DDI: +64 9 965 2660


Krystle Gardner


DDI: +64 9 965 2662



If you would like to subscribe to Clendons North Shore communications, please email Louise Gardner at


This publication is necessarily brief and general in nature. You should seek further information before taking any action in relation to the matters dealt with in this publication.





Clendons’ Guide to Business in New Zealand

November 2012

The New Zealand law firms of Clendons and Clendons North Shore provide legal services in several specialist industries. We apply a modern commercial approach and leading proprietary technology to the delivery of professional services, and are focused on achieving our clients' objectives.

This introductory guide outlines important features of the laws relevant to conducting business in New Zealand.

Corporate Structure

The New Zealand Companies Act 1993 (“the Companies Act”) sets out the main requirements for companies domiciled overseas to operate in New Zealand. This can be achieved by:

  • Incorporation of a new subsidiary company under the Companies Act 1993; or
  • Registering the foreign company as a branch in New Zealand; or
  • Acquiring shares in a pre-existing New Zealand company or entering a joint venture with a New Zealand company.

Incorporation of a Subsidiary

The Companies Act 1993 requires the following for the incorporation of a new company:

  • At least one shareholder and one director (currently these can be non-residents, although New Zealand is considering legislation which would require a company to have at least one resident director or agent);
  • Share capital (there is no required minimum size or par value);
  • Where the company chooses to have a constitution, a certified copy of the constitution must be prepared in accordance with the Companies Act and filed with the Companies Office; and
  • All the prescribed forms are to be filed with the Companies Office, including the particulars of the directors and shareholders, and the address of a registered office in New Zealand where correspondence can be sent and official documents can be served.

The ongoing statutory requirements for a New Zealand subsidiary include filing audited annual financial statements, audit reports, an Annual Return, and preparing an annual report unless all shareholders waive their right to have this prepared. Additionally, the company must use the full and correct company name on all correspondence and legal documents.

Registering a Branch

The Companies Act requires every overseas company that carries on business in New Zealand to register as an overseas company (referred to as a “branch”). The requirements for registration are:

  • Within 10 days of commencing trading, the overseas company must file a reservation of company name, and file all other prescribed registration forms at the Companies Office;
  • To lodge a certified copy of the company’s Articles and Memorandum of Association or its Constitution; and
  • To lodge particulars of a nominee resident in New Zealand on whom documents can be served and to whom communications can be sent on the company’s behalf.

The continuing requirements for a branch include filing financial statements and an annual return at the Companies Office (along with the relevant filing fee). In all correspondence and legal documents, the New Zealand entity must state both its full name, and the country in which it was originally incorporated.

The penalty for failure to register a branch is a fine for the overseas company and each of its directors of up to NZ$10,000.

Reporting Obligations (non-subsidiaries)

In addition to foreign-owned subsidiaries (discussed above), companies with more than 25% overseas shareholding (by a company incorporated outside New Zealand or by a non-resident) must have their financial statements audited. Furthermore, these must be filed with the Companies Office if the company is deemed a "large" company under the relevant legislation.

Overseas Investment Controls

Overseas investment in New Zealand is regulated.  The Overseas Investment Act 2005 sets out the circumstances in which the consent of Land Information New Zealand (“LINZ”) is required for overseas investment in land (or land owning companies) or significant business assets.  Whether consent is required depends on the amount of money involved and the type of investment being proposed. In granting consent, LINZ will take into account a number of factors including such things as the proposed residency of the purchaser and the purchaser’s commitment to New Zealand. There is a range of consent application fees (up to NZ$12,000), depending on the specific consent being sought.  The Act provides for fines and even imprisonment for failure to comply.


In New Zealand, taxes are levied under several regimes, including income tax, goods and services tax (“GST”), fringe benefit tax, withholding tax, import tariffs and miscellaneous excise duties. As a general rule, New Zealand capital gains or deceased estates are not taxed.

It should be noted that certain transactions in other jurisdictions that might attract capital gains can be assessed in New Zealand for income tax, for example some capital profits derived from transactions involving land will be treated as assessable income. Stamp duty was abolished in New Zealand on 20 May 1999.


Income Tax

Persons and companies resident in New Zealand pay tax on their worldwide income. Persons and companies not resident in New Zealand are subject only to tax on any income they derive in New Zealand.

  • For tax purposes a company is resident in New Zealand if it is incorporated in New Zealand, has its head office or centre of management in New Zealand, or the control of the company by its directors is exercised in New Zealand. The tax rate for resident and non-resident companies is a flat rate of 28%.
  • For individual earners, marginal rates are from 10.5% to 33%. Employers deduct income tax on a pay as you earn (“PAYE”) basis from wage and salary payments, and pay these deductions to Inland Revenue directly.  This deduction is made on account of the employee and at the end of the tax year any necessary adjustments are made with the employee.
  • The types of income that are subject to taxation are not precisely defined in the legislation.  There are many specific exclusions and inclusions that make up taxable income.
  • New Zealand is also a signatory to numerous Double Taxation Treaties with foreign countries.  This means that, in general, New Zealand allows a tax credit for foreign tax paid.  This tax credit is the lesser of the foreign tax paid or the New Zealand income tax payable. The tax credit available may change depending on the particular Double Taxation Treaty.
  • New Zealand also operates a full dividend imputation system.  This means that tax paid by resident companies creates imputation credits.  These credits can be attached to dividends paid by that company.  Where a dividend is fully imputed, it will be tax-free where the dividend is paid to a New Zealand resident.

Non-Resident Withholding Tax

Dividends, interest and royalties paid to non-residents are subject to non-resident withholding tax at a rate of 15% of the gross amount of interest or royalties, or 30% of the gross amount of dividend payments, (except for a number of special types of dividends, including fully imputed dividends). A Double Taxation Treaty may reduce these rates.

Non-resident withholding tax may not need to be deducted on interest when the non-resident is engaged in business through a fixed establishment in New Zealand, but then resident withholding tax would apply. Non-resident withholding tax on interest can be reduced to 0% where the payer is an approved issuer and the interest is paid in respect of a registered security under the Approved Issuer Regime.

Goods and Services Tax

GST is an indirect tax on most goods and services.  Usually GST is charged at a flat rate of 15%.  However in some limited situations, for example, when goods are exported or services are supplied to a non-resident outside New Zealand or a business is sold as a going concern, GST is charged at the rate of 0%. Financial services and rental paid for private accommodation are two of the major exemptions from GST.

  • Businesses are able to register for GST which means they can claim input credits for any GST they incur in conducting business. They must charge GST on goods and services provided, and file returns and pay to the Inland Revenue the net GST collected. GST registration is generally not mandatory until “supplies” exceed NZ$60,000 in any twelve month period.
  • When goods arrive into New Zealand, they are subject to GST which is calculated and collected by the Customs Department as if it were customs duty.  It is normal practice for the GST to be paid on importation.  However, if the importer has a deferred payment account with the Customs Department, GST can be paid on a monthly basis. Importers (including foreign companies) who are registered for GST and who intend selling goods in New Zealand can claim back the GST paid on importation.

Fringe Benefit Tax

Employers who provide non-cash benefits to employees while they are at work must pay fringe benefit tax.  This includes interest free loans, company vehicles and discounted goods.  The fringe benefit tax rate varies between 43% and 55%, and is a tax-deductible expense for employers. Superannuation Schemes that have been registered under the Superannuation Schemes Act 1989 are taxed at usually 30 - 33% on the income of the scheme, however benefit payments to employees are exempt.

Pricing for Income Tax Purposes

Transfer Pricing Regime

New Zealand has a transfer pricing regime which may regulate the price of transactions between a New Zealand entity and a non-resident “associate”. If the price charged has the effect of reducing the New Zealand taxpayer’s net income, the tax charged will instead be based on an “arm’s length” price (i.e. at the price that would have been charged if there was no association between the parties).

The transfer pricing regime applies in arrangements for supply of goods, services or intangible transfers such as royalties, trademarks, management fees and inter-company guarantees, where the arrangement is between companies, one of whom has more than 50% voting, ownership or income interest in the other company, and either:

  • One (or both) of the companies concerned is non-resident in New Zealand for tax purposes; or
    • Both companies are resident in New Zealand, but the purpose of the arrangement is that one of the companies carries on business overseas.

The transfer pricing regime does not directly apply to arrangements within a branch company as there is only one entity, however there are equivalent income apportioning provisions (see below). 

There is a high level of responsibility on the company to exercise judgement in determining the correct pricing method for calculating transfer prices, and maintain adequate documentation to evidence that transfer prices for things imported were accounted for at arm’s length, and the pricing method chosen to calculate that price complies with the requirements of the regime in respect to accuracy, completeness etc.

Non-compliance with the regime is considered by the Commissioner of Inland Revenue to be (at least) a failure to exercise reasonable care or even gross carelessness which brings with it minimum penalties of between 20% and 40% of the underpaid tax.

Apportionment of Branch Income

A branch is a resident for tax purposes and the income received by the branch is assessed for New Zealand income tax on an apportionment basis.  The amount of apportionment varies depending on the type of goods and services being traded. 

An alternative form of assessment of the branch company’s taxable income is for the branch to submit a profit and loss account of the business done in New Zealand (subject to certain requirements). The apportionment is calculated to produce a net taxable income or loss that would have been made by a company which carried out business totally independent from its overseas parent.  In this respect, the assessable income should be similar to that calculated under the transfer pricing regime.

Foreign Employees

Anyone who is not a New Zealand resident or citizen will require a work permit in order to work in New Zealand.  (Except Australian citizens, who may work in New Zealand without restriction).  There are five different types of work permits available depending upon the person’s circumstances.  They are for entry:

Ÿ    As a skilled migrant;

Ÿ    For temporary work;

Ÿ    Under the work to residence scheme;

Ÿ    As an employee of a relocating company; or

Ÿ    For a working holiday.

Employment Contracts

Overseas Employment Contracts

Where an employee is working in New Zealand for a foreign company under contract, that employment contract can state which jurisdiction governs the employment relationship so long as that choice is fair and reasonable to both parties. Where the contract is silent on which country’s law shall apply, the New Zealand courts have ruled that the country with which the contract has the closest and most real connection is the jurisdiction that will govern the contract.

Once an overseas company becomes a branch or sets up a subsidiary company in New Zealand, any employment contract that it may enter into is subject to the same laws as a New Zealand company, whether the employee is a New Zealander or a foreign national.

New Zealand Employment Contracts

Employment contracts in New Zealand are governed by the Employment Relations Act 2000 and case law.  There are also some specific regulations and statutes which govern minimum wages, holidays and working conditions. Since the Employment Relations Act was enacted, employees have had the choice of entering into individual or collective employment agreements.

The employment contract must contain effective procedures to deal with employment relationship problems, including complaints of unjustified dismissal, unjustified action disadvantaging an employee, discrimination, sexual harassment, and duress. The contract must also comply with the minimum standards and disclosure requirements as set out in legislation such as:

  • The Minimum Wage Act 1983;
  • The Holidays Act 2003;
  • The Parental Leave and Employment Protection Act 1987;
  • The Health and Safety in Employment Act 1992; and
  • The Injury Prevention, Rehabilitation, And Compensation Act 2001.

In New Zealand, employees have full protection from unjustified dismissal. A probationary period of up to 90 days can be agreed at the outset of the employment relationship.

Trade Practices

There are three principal laws governing trade practices in New Zealand: the Commerce Act 1986, the Fair Trading Act 1986, and the Consumer Guarantees Act 1993. There are other consumer protection laws which also may have an impact on trade in New Zealand, for example the Sale of Goods Act 1908, the Door to Door Sales Act 1967 and the Credit Contracts and Consumer Finance Act 2003.

1.         Commerce Act 1986

This Act deals with issues such as anti-competitive trade practices, merger and acquisition regulation and price control. Approval of the Commerce Commission, which enforces the Act, is required for any business acquisition which has or may have the effect of substantially lessening competition in a market.

2.         Fair Trading Act 1986

This Act deals with the way in which businesses interact with consumers and other businesses.  Under the Fair Trading Act, conduct in trade which is unfair, misleading or false is illegal. The Act covers conduct of persons “in trade” which may mislead as to:

Ÿ  The nature, characteristics, suitability for a purpose or quantity of services;

Ÿ  The nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.

3.         Consumer Guarantees Act 1993

This is the main piece of consumer protection legislation that is designed to give consumers rights against retailers, manufacturers and importers in relation to faulty and poor quality goods and services.

The Consumer Guarantees Act 1993 is restricted to sales of ordinary household goods and services to ordinary consumers and does not cover transactions with business to business transactions that do not involve consumer goods.  There is the ability to expressly contract out of the Act only in situations where the goods and services are purchased for business use.

The Commerce Commission is the government body in charge of administering and enforcing these three pieces of legislation.  However, this does not preclude civil actions under these three Acts.

Intellectual Property Laws

Since signing GATT and the Berne Conventions, New Zealand has updated its Intellectual Property laws.  Intellectual Property rights are covered by the following statutes:

Copyright Act 1994

The Copyright Act is based on the concept of ‘works’ which give the copyright owner the automatic exclusive right to (and to authorise any person to) copy, adapt, distribute, perform and broadcast copies of the work. Works which are protected by the Copyright Act include literary works, dramatic works, musical works, film and television (including audio), and cable programs (including the internet).

There is no requirement for registration of the work to gain protection under this Act, as it is automatic.  Generally, the duration of the protection granted for most of the works is 50 years from the death of the creator of the work. There is no longer protection for copyright owners from the importation of protected works.

Patents Act 1953

This statute gives the inventor an exclusive monopoly on the use of the registered invention for 20 years from registration. An updated Patents Bill is undergoing final revisions and discussions (including on software patents) prior to its anticipated enactment (likely in 2013).

Trade Marks Act 2002

This Act allows the registered proprietor the exclusive right to use the registered trademark in relation to goods and services.  There are a number of prerequisites including being non-generic and the continued use and protection of the trademark.  New Zealand is a party to the Madrid Protocol, effective 10 December 2012, allowing New Zealand businesses to file a single application directly with the Intellectual Property Office of New Zealand (IPONZ) and designate one or more overseas countries where trademark protection is sought.

Designs Act 1953

This Act protects the rights of designers in their industrial designs.  The Design Act requires the design to be registered.  Once registered the protection lasts for five years with the right to renew the registration.  This protection is rarely used as industrial designs are automatically protected under the Copyright Act for the life of the author plus 50 years.

Common Law

New Zealand has also retained the common law protection against unauthorised exploitation of business goodwill by using the company name, logos, packaging and other marketing tools.

James Carnie                                                               Brian Joyce

Principal                                                                       Principal

Clendons                                                                       Clendons North Shore

Email:                            Email:


This Introductory Guide by its nature cannot be comprehensive and cannot be relied on as advice. This guide is provided to assist in identifying legal issues on which legal advice should be sought. Please consult the professional staff of Clendons for legal advice specific to your situation.