Top 10 challenges of doing business in New Zealand

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New Zealand ranks among the top five countries in the world for ease of doing business, but having insight to the investment environment and local knowledge of the legal, accounting and taxation framework is essential to succeed.

New Zealand has laid out a welcome mat for foreign direct investment, offering incentives, rewards and a stable business environment. But having local knowledge of the legal, accounting and taxation framework is essential to any overseas venture, and there are still several challenges to overcome when setting up in the Pacific island.

The World Bank and International Finance Corporation (IFC) rank New Zealand first in the world for protecting investors and starting a business, and within the top 10 places in the world in five of the 10 essential criteria. The Transparency International Corruption Index 2012 puts New Zealand in first spot for lack of corruption and the anti-corruption NGO Transparency International continued to rank New Zealand number one for honesty and integrity in its public sector in 2012, the seventh year in a row the country was either first or first equal in the Corruption Perceptions index.

Businesses are attracted to New Zealand because of its efficient monetary and fiscal incentives, as well as its sound corporate environment and trade links. Domestically, the tax system is far easier to navigate because headline rates are all-encompassing. There is no payroll tax to pay, no social security tax (voluntary KiwiSaver was introduced in 2007) and no capital gains tax. A wide range of free trade agreements and pro-competitive regulation make New Zealand an ideal base for expansion in the Asia Pacific region, with free trade agreements (FTAs) in place in many of the major economies.

But there are still several hurdles that must be overcome when starting a business venture in New Zealand, and having local help on hand can prove to be a real asset when setting up overseas.

Starting a Business

The World Bank and IFC rank New Zealand number one in the world for ease of starting up a business. Companies are required to apply for registration with the Companies Office online (for IRD number and GST registration), which takes only one day to complete.

Dealing with Construction Permits

There are six procedures involved when obtaining construction permits, taking 89 days in total. Companies must receive resource consent (planning), building consent and an inspection from the District Council, as well as getting CCTV approval by Watercare and getting phone, water and sewer connection.

Registering Property

It only takes two days and two steps to register property by obtaining a land information memorandum and registering a title through Land Information New Zealand (LINZ).

Getting Electricity

Getting electricity is the most arduous element of setting up a business in New Zealand, requiring five procedures that take 50 days to complete. Dealing with the utility provider can take some time, particularly in the early stages of the procedure.

Getting Credit and Protecting Investors

New Zealand’s robust financial services sector and strong regulatory environment give good protection to investors and make it relatively easy to obtain credit. The World Bank and IFC rank New Zealand fourth in the world for getting credit and first for investor protection.

Paying Taxes

The fiscal environment in New Zealand is dominated by headline payments, which streamlines the process substantially. However, there are certain taxes which can be quite time consuming, such as the accident compensation corporation (ACC) levy or VAT returns, which take well over 100 days combined to complete.

Trading Across Borders 

As an island nation there is a strong reliance on fast and efficient cross-border trade. There are five documents to prepare when exporting and six when importing, taking ten days to complete on average. 

Enforcing Contracts

There are 30 procedures involved when enforcing contracts, taking 216 days all together. The cost of the attorney amounts to around 22% of the claim, although the court costs are substantially lower, standing at around 2% of the overall claim.

Resolving Insolvency

It takes 1.3 years to resolve insolvency, with the average recovery rate around 83 cents on the dollar.

Culture

There are marked differences between Maori and NZ European (Pakeha) societies in New Zealand, and businesses should be mindful of these disparities. Other than that, companies can expect quite a warm and relaxed welcome in the country. 

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We have the local knowledge to help you navigate these challenges. Whether you want to set up in New Zealand or just want to streamline your New Zealand operations, talk to us.