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The New Zealand Government has identified increased foreign investment as an important lever to raise economic growth and has embarked on a policy reform programme that it hopes will achieve that.
The centrepiece will be a more arms-open Overseas Investment Act which will:
- reverse the onus of proof so that, rather than investors needing to justify their proposed transaction, they will be allowed to proceed unless there is an identified risk to the national interest, and
- require non-contentious applications to be decided within 15 working days.
See our analysis here.
Our focus in this publication is on the other pieces in the puzzle, in particular the proposed revamp of the Active Investor Plus Visa.
The changes, announced on 9 February to take effect from 1 April 2025, will remove the requirement to demonstrate competence in the English language, reduce the amount of time investors must spend in New Zealand, allow bonds as an investment option, and take a more liberal attitude toward investment in the property market.
Two investment categories will be created, “Growth” and “Balanced”.
- Growth will require a $5m commitment for at least three years in either direct investments or managed funds, with a requirement to spend at least 21 days each year in New Zealand.
- Balanced will require a $10m investment for a minimum of five years and will permit a wider investment portfolio including: bonds (local government, Treasury, or traded on the NZX Debt Market), listed equities, new property developments, existing commercial or industrial properties and philanthropy.
Investors will need to spend a minimum of 105 days a year in New Zealand but can reduce this by choosing to invest above the $10m threshold. The reductions available are in a sliding scale:
|
Investment |
Potential reduction |
Time per year |
|
$11m to $12m |
14 days |
91 days |
|
$12m to $13m |
28 days |
77 days |
|
$13m plus |
42 days |
63 days |
We note, however, that no relaxation is proposed to the provisions in the Overseas Investment Act relating to farmland, fishing quota and residential property – meaning that gold visa holders will still be required to spend 183 days or more a year in New Zealand before they are able to buy a home here.
Other foreign investment initiatives include:
- the creation of an autonomous Crown Entity based on the Irish and Singaporean model to promote foreign direct investment
- the introduction of a “digital nomads” visa that will allow visitors to work remotely for a foreign employer while holidaying in New Zealand (although with the caveat that if they plan to stay more than 90 days they should “look at the possible tax implications”), and
- Inland Revenue is exploring ways to lessen the impact of New Zealand’s Foreign Investment Fund (FIF) regime on migrants.
The FIF regime taxes New Zealand residents on shares that they hold in overseas companies and can pose a significant barrier for non-residents who are contemplating moving to New Zealand. Migrants are generally able to benefit from a four-year transitional resident exemption from tax on foreign sourced income but will be subject to the FIF regime once the four-year period expires.
The current FIF rules are internationally unusual in that they generally deem an amount of income to arise from the overseas shares each year and impose tax on that deemed income, even if the amount is never realised. Inland Revenue is considering giving migrants a choice to be taxed on actual gains from overseas unlisted shares that they acquired before they migrated to New Zealand only when they are realised, i.e. on dividends when received and on gains when the shares are sold.
Chapman Tripp comment
These are all encouraging signals, but we don’t yet know the decisions that will come out of the FIF initiative or the final shape of the Overseas Investment Act amendments after they have been through the select committee and parliamentary process.
We expect that the treatment of housing will be a major subject for submissions given that the signal it sends is distinctly unwelcoming and will potentially undermine the rest of the Government’s policy reforms.
We also note that, while the proposed investment thresholds of $5m a year for the Active Investor Growth Visa and $10m for the Balanced Visa are lower than the $15m (or weighted equivalent in available assets or funds) required under the existing scheme, they are still high by international comparison – and that many jurisdictions have had similar schemes in place for years now, with mixed results.
