What is the appropriate structure to enter the New Zealand market?

Wednesday 20 October 2021, 8:10AM
By Media Giant

At NZ International Tax & Property Advisors, we have experienced increasing offshore inquiries from foreign businesses looking to set up their operation in New Zealand. One of the common questions asked is what is the appropriate structure to set up their New Zealand operations? We have considered an Australian parent company looking to set up its New Zealand operation.

The most common ownerships are a branch of the Australian business or a separate New Zealand subsidiary company. Each has its own pros and cons. Specific advice for your situation shall be considered to ensure the structure fits requirements and future plans. There are also tricky questions about tax residency and dual resident companies. Alternative options include Limited Partnership, a General Partnership, a Trading Trust or a Sole Trader, which could suit your businesses better.

Here are a few structures that you can select for your New Zealand based business and their advantages and disadvantages:

Option One: Branch of Australian company

A branch of an Australian Company is a relatively simple structure that can be registered quickly and easily. Here are a few things to be mindful of:

  • The New Zealand branch may be required to register with the Inland Revenue and file annual income tax returns. Any profit attributed to the New Zealand Branch shall be taxable in New Zealand. 
  • The New Zealand branch of an Australian Company structure may suffer from double taxation. A tax inefficiency can arise where the New Zealand profits are distributed to the ultimate shareholders of the Australian company. This is because no franking credits will be available on those New Zealand profits (as no tax is paid in Australia on those profits). 
  • Profits need to be allocated appropriately as the Australian parent company, and the New Zealand branch is the same legal entity.  

Option Two: Incorporate a subsidiary company in New Zealand

The New Zealand subsidiary structure is common for Trans-Tasman investment and, therefore, well understood. This is a relatively simple structure, and the compliance is not overly complex. The structure can work well for large operations and provide confidence to New Zealand customers that they are dealing with a New Zealand company. Here are a few things to be mindful of:

  • Profit will be taxed in New Zealand at 28% and will generate imputation credits. 
  • The New Zealand subsidiary structure may suffer from double taxation. When the Australian parent company pays a dividend to ultimate shareholders from the funds received from the New Zealand subsidiary, further tax may be payable by the shareholders. This will need to be carefully managed with your respective tax advisors.

Of course, tax is only one consideration when you are looking to set up a business in New Zealand. There is a myriad of other things to consider and people to talk to. Feel free to reach out to our team to see how we can assist and add value! Visit our website to explore our other tax services!