In the last few years, New Zealand has ranked quite high in various reports according to which it is among the easiest countries to do business in the world. This has attracted a large number of foreign investors and overseas companies interested in setting up operations here.
Registering a subsidiary is one way in which a foreign company can start a business in New Zealand. The other option is to open a branch, however, there are important limitations in terms of this solution that have to do mainly with the fact that it is not separate from the foreign company. If you are interested in expanding to New Zealand, our team of company formation experts can answer your questions.
|Applicable legislation (home country/foreign country)||Foreign country – Companies Act|
Best used for
|Foreign companies expanding to New Zealand can open a subsidiary.|
|Minimum share capital (YES/NO)||
There is no prescribed minimum capital for those who open a subsidiary in New Zealand.
|Time frame for the incorporation (approx.)||
20 working days
|Documents to be filed by parent company||
Documents relevant to its shareholding in the subsidiary
|Legal representative required (YES/NO) in New Zealand||
|Local bank account (YES/NO)||
|Independence from the parent company||
The subsidiary in New Zealand is a separate legal entity from the parent company.
|Liability of the parent company||
Up to the extent of its shares owned in the subsidiary
|Corporate tax rate in New Zealand||
The standard New Zealand corporate tax rate is 28%
|Annual accounts filing requirements||
– annual income tax returns filed by 31 March,
– small companies can prepare special purpose financial statements (minimum standard)
|Possibility of hiring local staff in New Zealand (YES/NO)||
|Travel requirements for incorporating branch/subsidiary (YES/NO)||
Not mandatory for the entire incorporation phase for those who open a subsidiary in New Zealand.
|Double tax treaty access (YES/NO)||Yes|
Foreign investors have a few options when it comes to the types of structures they can register, but foreign companies can also choose between the subsidiary and the branch office. Foreign companies seeking to first test the market can open representative offices in New Zealand.
One of the best ways of opening a business as a foreign company in New Zealand is by registering a subsidiary company, as it offers a high level of independence.
Below, our company formation specialists in New Zealand explain the requirements and steps to complete in order to open a subsidiary.
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Requirements to open a subsidiary company in New Zealand in 2023
Opening a subsidiary in New Zealand implies registering a limited liability company with the local Trade Register. This implies choosing between a private and public limited liability company. The share capital requirements for opening a subsidiary in New Zealand are the same no matter the type of company chosen: 1 USD. The foreign company must appoint at least one director who must be a New Zealand national, however, one of the company’s representatives can apply for a residence permit and become a director of the subsidiary.
Another important requirement for opening a New Zealand subsidiary is for the company to have a legal address in this country. This will grant it the status of a resident company. The virtual office can be a good solution for the first phase of the company registration procedure in New Zealand.
The foreign company will also be required to open a bank account with a local bank in order to deposit the share capital of the subsidiary.
Certain requirements apply in case of company directors in NZ. Our team summarizes some of the most important ones below:
- Permanent residence: all companies in NZ are required to have at least one director who lives in the country or in Australia and is the director of a company incorporated there;
- Temporary residence: those who are not permanent residents can still apply as directors, provided that they spend more than 183 days in a 12-month period in the country;
- Age: all directors must be older than 18 years of age;
- Status: a company director cannot be an undischarged bankrupt individual and he cannot be an individual who has been convicted of a crime that involved dishonesty in the last five years.
Those who have been prohibited from being a director, general partner, or promoted under statutory provisions cannot act as company directors for a subsidiary in NZ. Other disqualification criteria can apply and our team can give you more details as needed.
All company directors who will be appointed for the NZ subsidiary will need to be registered after submitting the application for incorporation with the Companies Office. Once the company is registered, any new director who is appointed needs to ne registered with the Office within 20 days following the appointment. The information that is made available on company directors in NZ includes their name, date and place of birth, residential address (a physical address, not a PO Box) and the date of appointment. Additional contact information can be provided for each director.
Apart from the requirements concerning company directors, NZ subsidiaries are expected to register for tax when they incorporate the company (the Inland Revenue number and the Goods and Services Tax number are received at the same time with the company’s certificate of incorporation). Obtaining the GST and Inland Revenue number is conditioned by having to provide the business industry code – BIC. This is a code with 7 characters that classifies the business according to the industry in which it activates. Our team can give you more details.
Documents needed for opening a New Zealand subsidiary
Foreign companies interested in opening subsidiaries in New Zealand in 2023 must prepare the following documents:
- the parent company’s statutory documents and Certificate of Registration;
- the subsidiary’s incorporation documents must also be drafted;
- the resolution of the parent company’s shareholders to set up the subsidiary;
- the trade name reservation (the subsidiary’s name will usually be the same as the parent company’s name);
- the receipt issued by the bank showing the deposit of the share capital;
- the lease agreement which proves the registered address of the New Zealand subsidiary;
- information about the foreign company’s representative in New Zealand (the subsidiary’s director).
The foreign company must also provide the date at which the subsidiary will start its operations in New Zealand, as well as a valid email address.
Once the subsidiary is registered with the Trade Register, it must also obtain a tax and VAT number and apply for the necessary licenses to start its activities.
Our New Zealand company formation consultants can help with the preparation of all the documents required to register a subsidiary in this country.
Accounting requirements for subsidiaries in New Zealand
The subsidiary is regarded as a tax resident company in New Zealand, which means it will abide by the national accounting standards imposed here and file annual returns with the tax authorities in this country. It is important to know that the subsidiary has the possibility of choosing the month in which these returns will be filed.
When it comes to the taxation of a subsidiary, it will be subject to the corporate income tax on its worldwide profits. The following taxes for companies are relevant in 2023:
- the corporate tax rate in New Zealand is 28%. Subsidiaries are taxed as resident companies because they have their management located here (they are effectively controlled from New Zealand).
- the withholding tax applicable on dividend, interest, and royalties payments, with rates of 33% for dividends in certain cases and 28%, 33% or 45% for interest; there is no withholding tax on royalties in case of resident companies;
- the goods and services tax with rates of 15% or 0%;
- other taxes are include the social security contributions.
Understanding the principles of tax compliance for corporations applicable in New Zealand is important to all investors, whether they decide to open a local company, or to register an overseas company to do business in NZ.
If you wish to know more about the filing and payment requirements, the principles for filing consolidated returns (available to wholly owned groups of companies), or other details about the possible penalties imposed for the late or incomplete filing of tax returns, our team can help you with updated information, on a yearly basis.
Advantages of opening a subsidiary in New Zealand
Opening a subsidiary company has many benefits for the foreign company. Among these we mention that:
- The subsidiary is an independent legal entity which can carry out other activities than the parent company, meaning it can adapt to the requirements of the local market.
- The share capital requirements for opening a subsidiary in New Zealand are some of the lowest in the world, as for the company incorporation procedure – it takes about one week to have the company registered with the Companies Office.
- It is also possible for holding companies to set up subsidiaries in New Zealand with the purpose of owning and managing other businesses.
- From a taxation point of view, the New Zealand subsidiary will be treated just like any other local company and can apply for various benefits with the central authorities.
These are all important advantages when compared to the branch, the other viable option for overseas companies that are interested in doing business in New Zealand. Our team of company formation agents can give you complete details about the differences between these two options, with an emphasis on the fact that the subsidiary is the only one that is independent. By contrast, the branch is not a legal entity (it does not have legal personality and cannot enter into agreements in its own name), rather it is a complete extension of the parent company abroad. Read below a brief description of available alternatives.
Options for foreign companies willing to set up an NZ business
Registering an overseas company in NZ is possible in one of three ways:
- Open a wholly owned subsidiary: this is a separate company from the one abroad and it is registered with the New Zealand Companies Register just like any other resident company;
- Start a branch: this is not a separate legal entity and it is registered with the overseas Company Register rather than the regular one; although it is essentially the same as the parent company abroad, its activities are governed by the laws in New Zealand;
- Transfer the company: investors can also choose to relocate their company to NZ in its entirety; company registration will also be required in this case.
Both the subsidiary and the branch will need to have a unique company name, one that is not too similar to that of a company that is already registered. The first step is to reserve the chosen name and then to wait for the approval. The applicant then has 20 days to incorporate the company with the chosen name. Investors can avoid having their name rejected if they company with the general requirements for the chosen name to not be restricted, offensive, identical or almost identical to one in use. Although the authorities will provide the reason for the rejection and the applicant can resubmit the application, working with our team will help you save time by avoiding these types of setbacks.
Each of these options presents unique particularities and can have advantages for those operating in different business fields. While for insurance or banking companies the preferred option may be to register a branch, companies activating in other business fields may find it more convenient to set up a wholly or partially owner subsidiary for which they will not be liable.
If you are interested in opening a subsidiary in New Zealand in 2023 and need guidance, please contact us with full confidence. We can also help foreign investors who want to open other types of companies in New Zealand.
The country recorded a 5% increase in the number of enterprises (between February 2021 and February 2022). If you are interested in company formation this year, you can talk to our team.
For details about other business forms, or the other ways in which a foreign company can start doing business in the country, please reach out to our team. We assist investors who wish to open a company in New Zealand irrespective of their chosen business form and of whether the NZ company is an extension of a foreign company or is controlled by one. You can find out more about our services by contacting us.