Billionaires Don’t Need To Go “Bunkers” in New Zealand!

May 21, 2020

One of the much repeated pandemic media stories has been about “Billionaires fleeing to bunkers in New Zealand”. Putting aside the obvious fact that most commercial and private air travel has ceased;  borders were shut to visitors and New Zealand is 16 hours from the US west coast, I could not help but ask myself just how much of this story is over-hyped fantasy and how much is reality? Just how attractive is New Zealand as a residence for ultra high net worth families. And are the bunkers really necessary?

Bunkers in New Zealand?

Firstly, let’s consider New Zealand. In my experience acquiring an alternative residence in this wonderful country can be an excellent addition to a wealthy family’s Backup Plan. However, unless one’s objective is to subject your loved ones to an unpleasant and unsustainable lifestyle, acquiring a bunker is completely unnecessary.

Secondly, given the lack of reports of such large items arriving in New Zealand or building permits for bunkers having being submitted, my guess is that stories of such purchases are just fabricated sales hype (“Hunting the One Percents Doomsday Bunkers in New Zealand”).

But the New Zealand residence part makes complete sense! In this second in a series of blogs on alternative residence locations, we will examine less subterranean features that HNW families may want to consider when adding New Zealand to their Backup Plan.

Relocating to New Zealand – the practicalities

bunkers in new zealand - as are sheep

The sheep like it there… but will you?

Cost of acquiring NZ residence status

There are several investor categories available to those seeking residence in New Zealand. However, since most HNW families need to consider physical presence requirements as a cost, I will focus on the category that has the smallest physical presence requirement….the Investor 1 category. This category requires that a HNW investor place NZ$10M (approximately US$6.2M) in NZ stocks, bonds or investments for a three year period. This means that the “cost” of acquiring NZ citizenship is diversifying part of their liquid portfolio in NZ. Therefore, 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 Investor 1 Category grants the applicant and their family a residence permit which requires them to spend a minimum of only 46 days each year for two years in New Zealand. At the end of the second year they are then granted 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.

New Zealand offers City living alongside a beautiful natural landscape

New Zealand offers City living alongside a beautiful natural landscape

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:

  • One agrees to tax residency; or
  • One spends more than 182 days physically presentin NZ; or
  • One has a permanent establishment in NZ (i.e. a “pied a terre / home” and other connections)

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 may only apply 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.

Rate of Covid-19 cases and deaths per capita

New Zealand’s strategy to deal with the global Covid-19 pandemic was ranked as amongst the best in the world.

International school availability

The schooling system in NZ – both private and public – is amongst the best in the world with the International Baccalaureate program widely available.

New Zealand’s rich and varied landscape is world renowned.

Family Law situation if NZ courts claim jurisdiction:

Either married parties, or parties who have lived in a permanent relationship can bring relationship-derived property claims. 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.

Bunkers in New Zealand

The hobbits may well have lived underground in New Zealand… You don’t have to!

Conclusions – New Zealand is wonderful! Bunkers in New Zealand are not…

In summary, for HNW families, NZ is an excellent option to easily (and cheaply) add another alternative residence arrow in their quiver. Furthermore with its breathtaking landscape and warm inviting population, its hard to understand why anyone would condemn themselves to living in an orc hole!

Interested in exploring other destinations?

Explore our other blogs about possible havens for second residences:
Vietnam
Canada

A Second Residence in Canada?

A Second Residence in Canada?

With Covid-19 encouraging more and more HNW individuals to relocate to safer havens we look at the pros of a Second Residence in Canada. New Zealand has made headlines during the Covid 19 pandemic as a prime “Time to get out of Dodge” location.  However, there is...

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