New Zealand: New tax disclosure requirements for overseas investment
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

New Zealand: New tax disclosure requirements for overseas investment

Sponsored by

sponsored-firms-russel-mcveagh.png
Changes introduced for overseas investment in certain New Zealand-based assets

Greg Neill and Isabelle Collins of Russell McVeagh explain why investors should take care in providing tax disclosures.

The New Zealand government has enacted new tax disclosure requirements as part of the consent process for overseas investment in certain New Zealand-based assets. Two tax-relevant law changes have become effective in 2021: a reworked ‘investor test’ for overseas investors in sensitive assets and a tax information disclosure requirement for overseas investors investing in significant business assets.  

Who must gain consent before investing in New Zealand?

The overseas investment regime exists to manage risks associated with overseas investments in New Zealand.  The rules require prospective investors to apply for consent to invest in a significant business asset or sensitive land or fishing quota (collectively, ‘sensitive assets’) in New Zealand from the Overseas Investment Office (OIO). 

A business asset is generally deemed significant if it is worth more than NZ$100 million (approximately US$71 million).  This threshold may be higher where amended by a fair-trade agreement. 

‘Investor test’ for investments in sensitive assets

The 'investor test' must be met in order for OIO consent to be granted for investment in sensitive assets and determines whether prospective overseas investors are unsuitable to own or control sensitive New Zealand assets. The investor test forms part of the assessment of most consent applications and assesses the possible risks of the investor investing in New Zealand based on their character and capability.

The reformulated investor test regarding capability includes two tax-specific disclosure requirements relating to the investor's taxpaying history in New Zealand and in overseas jurisdictions:

  • Whether the investor has been liable, in the preceding 10 years, for a penalty in respect of an abusive tax position or evasion under New Zealand law or an equivalent rule in an overseas jurisdiction; and

  • Whether the investor has outstanding unpaid tax of NZ$5 million or more due and payable in New Zealand or an equivalent amount due and payable in another jurisdiction.

Investors who answer affirmatively to either of those disclosures will need to provide the OIO with evidence as to why they are still suitable to control or own sensitive New Zealand assets. 

Disclosure of tax-related information for investments in significant business assets

Overseas investors intending to invest in significant business assets in New Zealand are now required to provide certain tax information in their consent application to the OIO. 

The tax information is collected by the OIO in Form IR1245 prior to its commencement of the substantive consent process and is passed directly to the New Zealand Inland Revenue.  The information is not strictly used by the OIO in its own consent assessment but is considered necessary for Inland Revenue's task of monitoring all large-scale overseas investments in New Zealand.  Once Inland Revenue has assessed the tax disclosure information, the OIO will process the investment application.  

Information now required to be disclosed to Inland Revenue as part of the overseas investment consent application process includes:  

  • A high-level overview of the investor's plan for the significant business assets over a three-year period (starting when the investment will be given effect to), including details of significant capital expenditure;

  • The investor's tax residence, and that of the investor's holding company (if applicable);

  • The investment's capital structure, including the likely percentages of equity and debt funding;

  • The likelihood the investment will use a hybrid arrangement; and

  • Any likely transfer pricing arrangements. 

While only high-level information is required to be included in Form IR1245, the required disclosures will require an understanding of the application of complex areas of New Zealand tax law. In addition, Form IR1245 is still relatively new and does not seamlessly apply to all relevant overseas investment transactions. Investors should take care in providing the tax disclosures and seek specialist New Zealand advice where necessary.  

Greg Neill

Partner, Russell McVeagh

E: greg.neill@russellmcveagh.com

Isabelle Collins

Law clerk, Russell McVeagh

E: isabelle.collins@russellmcveagh.com

more across site & bottom lb ros

More from across our site

Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
Gift this article