Doing business in New Zealand - Grant Thornton

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Finance and banking Banking system New Zealand’s central bank is the Reserve Bank of New Zealand. Its prime function is to use monetary policy to control inflation and keep it within a specific target band, currently 1 to 3%. The Reserve Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year. The Reserve Bank also has other important functions including the issuing of notes and coins, managing New Zealand’s foreign exchange reserves, and the registration and prudential supervision of banks. New Zealand’s banking industry is substantially deregulated. This has created a very competitive banking environment; however, it has also led to the situation where about 90% of banking assets are now controlled by Australian-owned banks. There are presently 21 registered banks, the largest include ANZ National Bank, the Bank of New Zealand, ASB Bank, Westpac, TSB Bank and Kiwibank. Banks offer the usual full range of lending, cash management and investment services. Foreign currency accounts may be operated in New Zealand. Money laundering rules are strictly enforced and banks require evidence of identity to open an account. No tax identification number is needed, although failure to provide a tax number will result in a higher rate of withholding tax being imposed on interest earned. Capital markets Finance can be raised through New Zealand’s capital markets. New Zealand has one authorised stock exchange, the NZX, which operates three securities markets, namely the New Zealand Stock Market (NZSX), the Alternative Market (NZAX), and the Debt Market (NZDX). The NZSX and NZAX are New Zealand’s equities markets. The NZSX is the premier market with 167 listed securities and total market capitalisation of around $58 billion, while the NZAX is a lower cost market designed for small to medium sized, high-growth companies and non-traditional entities such as co-operatives. The NZDX is the market for the trading of debt securities, including corporate and government bonds and fixed income securities. The NZX also launched a derivatives market in 2010, which supports the trading of dairy product futures and options. Other sources of finance Debt and equity can also be raised through the issue of securities directly to the public. Such public offerings are regulated by the Securities Act 1978 and other securities legislation and generally require the issue of a prospectus and investment statement. This Act is about to be replaced by another more comprehensive piece of legislation which is currently known as the Financial Markets Conduct Bill. Raising capital from private equity firms is a further option, although the venture and seed capital markets in New Zealand are very limited by international standards. Aside from trading banks, a range of other financial institutions also exist including finance companies, merchant banks, building societies, credit unions, friendly societies, and insurance companies. They generally provide deposit-taking and lending services but usually to particular niche markets. Financial Markets Authority The Financial Markets Authority (FMA) is a new Crown entity established in 2011 to promote the development of fair, efficient and transparent financial markets, with the objective of restoring investor confidence in the markets. It took over the functions of the Securities Commission and Government Actuary, and consolidated other regulatory functions from the Ministry of Economic Development. The FMA is responsible for overseeing and enforcing securities, financial reporting, and company law as they apply to financial services and securities markets. It also regulates securities exchanges, financial advisers, financial service providers, trustees and auditors. Doing business in New Zealand 8
Imports Import restrictions There are a number of restrictions on the goods that may be imported into New Zealand. These restrictions relate primarily to consumer safety issues, as well as illegal substances and firearms. New Zealand tightly monitors imports, especially in relation to food and agricultural produce, in order to prevent the introduction of pests. Other goods are restricted for environmental reasons and because of United Nations sanctions. Customs duties Import licensing no longer exists but there are tariffs in some circumstances, although more than 80% of the total value of imported goods are tariff-free. Tariff rates vary from item to item and also depend on the country of origin, with some countries such as Australia, Canada, Malaysia, Singapore, Thailand, China, and Pacific Forum countries having preferential rates. Generally, import tariffs of 5% apply to textiles and a range of other imported products that are also made in New Zealand, such as processed foods, machinery, steel, and plastic products. Tariffs of 10% apply mainly to clothing, footwear, and carpet. Goods and services tax (GST) is payable to Customs for goods imported into New Zealand, and is generally recoverable by GST-registered persons. Doing business in New Zealand 9
Page 1 and 2: Grant Thornton New Zealand 2012 Doi
Page 3 and 4: Foreword If you are planning on doi
Page 5 and 6: • Queen’s Birthday - 1st Monday
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Doing business in New Zealand - Grant Thornton

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