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For some foreign companies, expanding their business into the New Zealand market is an attractive choice. 

New Zealand’s robust credit information standards, straightforward business setup, and strong judicial system are compelling reasons to invest in their business market. 

As a result, many companies may be wondering whether they can operate in New Zealand, and what registrations or incorporation may be required.

If this is you, read on to learn more. 

Can Foreign Companies Operate In New Zealand?

If you ‘carry on a business’ in New Zealand, you must have either a local subsidiary company (wholly or partly owned) or a branch office.

But what does it mean to ‘carry on a business’ here? New Zealand companies are governed primarily by the Companies Act 1993, which unfortunately does not provide an explicit definition of what this entails.

There are known examples of what constitutes carrying on business in New Zealand, such as:

• Dealing with property in New Zealand on behalf of someone else
• Taking a series of actions to advance a company’s gain in New Zealand
• Conducting a business in New Zealand with a view to profit
• Repeatedly making deals and contracts in New Zealand

If you are unsure whether this applies to you, you should speak to a New Zealand lawyer to get advice on whether your company is considered to be carrying on a business in New Zealand.

What If You’re Not Carrying On a Business In New Zealand?

If your company is not considered to be carrying on a business in New Zealand, you don’t need a subsidiary or a branch. Instead, you could simply start a representative office.

This will give you the ability to communicate more easily domestically and promote your company from abroad in New Zealand. 

However, a representative office cannot engage in any activities that might be seen as carrying on a business — or else, you’ll need to set up a branch or subsidiary.

Should A Foreign Company Incorporate A Subsidiary Or Register A Branch Office?

See the table below for a high-level comparison of subsidiary and branch structures.

	Subsidiary	Branch
Setup Requirements	Business address, New Zealand resident director (satisfying the living in New Zealand Requirements) and governance structure. Alternatively, a Director that resides in Australia (and is the Director of an Australian company) can also serve as a director without living in New Zealand.	Application form and a certified copy of incorporation from the country of origin.
Entity	A New Zealand company with a New Zealand Business Number.	A Non-New Zealand entity
Liability	Limited by shares in the local company.	Attributed to the foreign company. A resident New Zealand agent will also be required and may be held liable for the conduct of the company per New Zealand corporate regulations.
Office Required	Yes, for the delivery of official Companies Office correspondence.	Yes, and it must be manned for certain hours of the day by your agent.
Tax Applicable	Worldwide income and GST.	New Zealand sourced income and GST.
Tax Filings Required	Regular tax filings to Inland Revenue for worldwide income of the New Zealand entity.	Annual return of the foreign company. Tax filings to Inland Revenue for New Zealand sourced income.
Corporate Filings Required	Yes, an annual fee applies.	An annual returns fee applies.

Let’s take a look at these two options in greater detail.

Option 1: Wholly or Partly Owned Subsidiaries

A wholly or partly owned subsidiary is a local company owned by a foreign company. As an entity in New Zealand, your local company will be liable to the extent of their shareholdings and will be required to follow regular New Zealand company regulations.

Benefits Of A Subsidiary Company

Subsidiary companies offer several benefits to foreign companies by providing a stronger separation between the entities. As a separate legal entity, potential litigation or legal issues will be limited to the local New Zealand subsidiary. 

In addition, subsidiary companies allow foreign companies to limit their financial reporting to only their New Zealand business activities.

Starting And Operating A Subsidiary Company

To establish a New Zealand subsidiary, foreign companies may incorporate locally by lodging an application to register with the NZ Companies Office. 

As a New Zealand company, at least one New Zealand resident director will be required along with annual statement filings, which confirm to the Companies Office your company’s shareholders, directors, solvency and addresses. Your directors will be required to comply with their duties as directors in New Zealand.

Option 2: Branches

Branches are the second option for foreign companies looking to do business in New Zealand. Branches, unlike subsidiaries, are not local legal entities. This means the foreign company will be liable for legal issues and can sue or be sued in New Zealand.

Benefits Of A Branch Office

There are two main benefits to creating a branch office rather than a subsidiary company. Firstly, the process and maintenance requirements of opening a branch in New Zealand are less onerous than starting and maintaining a local subsidiary company.

Secondly, while the tax rate for subsidiaries and branch offices is the same, some branch offices may not be taxed at all depending on whether the income generated by the branch is considered New Zealand sourced income. 

Also, branch offices will only be taxed on income deemed to be New Zealand sourced. This is unlike subsidiaries, where taxes will apply to the worldwide income of the company.

Starting And Operating A Branch Office

To establish a branch office, you will need to reserve a company name (see One Check for what is available) that is the same as your officially registered name. Then, you will need to submit an application with the New Zealand Companies Register. Once you have received your certificate of registration, you’re good to start trading in New Zealand! 

Conclusion

Foreign companies carrying on a business in New Zealand will need to be registered locally as a branch or subsidiary. Subsidiary companies can provide foreign companies doing business in New Zealand with greater separation between their operations and financial information.

In contrast, branch offices are a simpler way to create and maintain a local entity.

Next Steps

If you are interested in setting up the right structure for your business operating in New Zealand, we are here to help. The friendly team at Sprintlaw can advise you on your options during the business setup process.

If you would like a consultation on your options moving forward, you can reach us at 0800 002 184 or [email protected] for a free, no-obligations chat.

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