One of the attention-grabbing pandemic media stories was about American “Billionaires flying to New Zealand” and hiding in underground bunkers. As part of our ongoing series on alternative residences, we looked into these reports in June 2020. We concluded that “unless one’s objective is to subject your loved ones to an unpleasant and unsustainable lifestyle, acquiring a bunker is completely unnecessary.” We also concluded that “the New Zealand residence part makes complete sense!”
Fast forward two years and New Zealand is back in the alternative residence news after announcing changes to its Migrant Investor Categories. These are set to take effect in mid-September. And no, there is still no need for American billionaires to go “bunkers” in New Zealand. Indeed, along with the new category of migrant investor, there are many features of the New Zealand migrant investor program that HNW families will want to consider when if and when they add New Zealand to their Backup Plans.
Cost of acquiring NZ residence status
As a result of the announced changes, there are two fewer investor categories available to those seeking residence in New Zealand. The formerly attractive Investor 1 category is no more…nor is the Investor 2 category. They are replaced by the new – (AI+) category that goes live on September 19. Unfortunately, the full instructions are not yet available, but the broad details of the new category are as follows:
- The required investment amount is between NZ$5M – $15M (approx. US$3.1M – 9.2M). The amount depends on how the applicant chooses to invest. You can choose either direct investments into designated companies, investment into designated PE and VC funds, and investment into listed equities and/or philanthropic investment/gifts;
- The investment period will be four years. Investments are made over the first three;
- Physical presence in New Zealand requirement will be 117 days over the four year period. This amounts to less than 30 days per year;
- The investment into listed equities will be capped at 50%;
- Philanthropic investment will be capped at 50%;
- The English language requirement will be a minimum IELTS (or equivalent) score of 5.0; and
- Applicants will have the opportunity to consult with New Zealand Trade and Enterprise (NZTE) officials to learn more about investment opportunities in New Zealand.
This new category means that aside from the reasonable physical presence requirement, the “cost” of acquiring NZ citizenship is diversifying part of one’s liquid portfolio in NZ. Depending on foreign exchange and returns on investment over this time, the cost could easily be zero or positive.
Annual cost of maintaining residence status?
The Active Investor Plus category grants the applicant and their family a residence permit. It requires them to spend a minimum of less than 30 days each year in New Zealand for four years. Once a total of 117 days is achieved, if the other conditions have been satisfied the applicant can apply for permanent residence.
Minimum physical presence requirement to maintain residence status?
Once permanent residence is acquired there is no annual physical presence or tax status necessary to maintain permanent residence.
Ability to own property? Freehold or lease?
As a resident permit holder, you are allowed to own land/property in freehold in New Zealand IF you are already or agree to become tax resident.
When and how does tax residence kick in?
One becomes tax resident in NZ when:
- You agree to tax residency; or
- You spend more than 182 days physically present in NZ; or
- A permanent establishment in NZ (i.e. a “pied a terre / home” and other connections) is established.
It is important to note that NZ is signatory to a large number of tax treaties. As a result, these treaties can be used either to a) rebut NZ presumed tax residence; OR b) claim NZ tax residence as a shield against taxation in another jurisdiction.
Income tax? Worldwide or domestic source? rates?
If one is tax resident in NZ, then normally one would include domestic and international source income. However, there are legal pre-immigration tax strategies that, if properly implemented, could effectively leave only NZ domestic source income subject to NZ tax. NZ income tax rates are progressive with a top rate of 33% – but with proper planning this will only be applied to NZ source income.
Capital Gain tax?
There is no capital gains tax in New Zealand.
Estate and/or Wealth Tax? Worldwide or domestic situs property? Rates?
There is no gift, estate, inheritance or wealth tax in New Zealand.
Quality of Medical Facilities?
New Zealand’s medical facilities are world class with both public and private options available to resident permit holders.
New Zealand’s Successful Strategy to Deal with Covid-19
Their strategy to deal with the global Covid-19 pandemic was judged to be one of the best in the world.
International school availability
Family Law situation if NZ courts claim jurisdiction:
Relationship-derived property claims may be brought by persons who are married or persons who have lived in a permanent relationship. There is no difference whether the relationship was homosexual or heterosexual.
Broadly speaking, all property obtained during the relationship is divided equally. In respect of property that is brought into the relationship, an assessment will be made of any contributions the other party has made to the property after it was introduced.
In summary, for HNW families, New Zealand is an excellent option to easily (and relatively cheaply) add a quality alternative residence arrow to their backup plan. Furthermore, with its breathtaking and varied geography and warm, inviting population, it’s hard to understand why anyone would want to condemn themselves to living in a bunker!