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Buying a house in NZ for non-residents
New Zealand generally encourages foreign investment from all countries, however a minimum level of control is maintained to ensure that undesirable investment is discouraged, and to control the acquisition of certain sensitive land.
Whilst the disincentives to foreign investment are minimal, there are effectively no incentives.
Controls on foreign investment are found in the Overseas Investment Act 1973 ("the Act") and its regulations.
The Overseas Investment Commission ("the Commission") administers the Act. An "overseas person" (as defined in the Act) must obtain consent under the Act's regulations before that person acquires or takes "control" of "significant" assets in New Zealand. The significant assets relate to:
- businesses or property worth more than NZ$10 million;
- land over 5 hectares, or worth more then NZ$10 million;
- certain sensitive land over 0.4 hectares (e.g. on islands, contained within or next to reserves, historical or heritage areas, the foreshore or lakes).
Control is generally associated with an overseas person obtaining a 25% or more ownership or a controlling interest in any asset.
Applications for consent under the Act are made to the Commission.
When considering applications the Commission considers the extent to which the proposal will promote New Zealand's economical growth and development through efficient utilisation of resources. The criteria taken into account include but are not limited to the following:
- added market competition;
- lower prices and greater efficiency;
- the introduction of new technology, managerial and/or technical skills;
- the development of new export markets and greater market access;
- the creation of job opportunities or the retention of existing jobs;
Whether the proposal creates opportunities for the current owners to realise their investment to the best advantage and the flow on effects such realisation might have.
It is not necessary for the proposal to have benefits in terms of all the above criteria but obviously the more criteria that are met, the more likely it
will be that the proposal will be approved.
Very few well-prepared proposals are turned down, reflecting New Zealand's generally welcoming approach to foreign investment.
There are currently no direct or indirect subsidies from the Government which would adversely affect foreign investors.
New Zealand is now essentially an open market economy with little or not restrictions on the movement of money into and out of the country.
Foreign investors are of course subject to New Zealand tax laws and will have to pay tax in New Zealand on income derived in this country.
The impact of the tax may vary depending on whether New Zealand has a double taxation agreement with the investor's country of origin.
The tax issue could be particularly significant if the investor is classified as being resident in New Zealand for tax purposes.
This would normally only occur if in fact the investor made New Zealand his/her principal place of residence and business, in which case the investor would be taxed in New Zealand on his/her world-wide income.
To summarise, foreign investment in New Zealand is now encouraged and there has in fact been substantial foreign investment in New Zealand over recent years.
While there are still regulations covering foreign investment these are not seen as a particular impediment as the criteria are sufficiently wide that few applications are rejected.
Should you wish to buy a large or valuable property or one at a location where restrictions apply, you run into the Foreign Investment Act and in that case we recommend that you contact a NZ based lawyer to assist and advise you.
We are very happy with the service of Mr. Junior Witehira, firstname.lastname@example.org, please feel free to contact Junior's secretary Debra for more information.