Waikato Business News January/February 2017

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16 WAIKATO BUSINESS NEWS January/February 2017 Waikato companies attract significant angel funding Two Waikato companies are benefiting from Bay of Plenty-based investment facilitator Enterprise Angels’ growing presence in Waikato. Ruakura-based companies Quantec and Synthase Biotech have together raised more than $1 million, bringing the total number of Waikato companies that have been funded by Enterprise Angels to five. Both companies received strong interest when they listed on the newly launched AngelEquity platform. AngelEquity’s goal is to offer wholesale investors the opportunity to invest in New Zealand’s early-stage, angel-backed companies anytime, anywhere. Agri-tech company Quantec raised a total of $429,000 - well above the targeted $320,000. The Government’s Seed Co-Investment Fund (SCIF) committed a further $100,000 to the company. Quantec uses its patented discovery of a novel milk protein to develop applications in human and animal health. Between them co-founders Dr Rod Claycomb and Dr Judy Bragger have many years’ experience in research and commercialisation in the dairy industry, both in New Zealand and overseas. One key existing investor (and investor director for SCIF) is Quantec chairman, John Birch, director of Perry Investment Management Limited and former chairman of Hamilton International Airport. “Quantec required funding for working capital to progress product safety trials, conclude subsidiary transactions to grow the Epiology and Quantec ingredients businesses and for further product development,” says Mr Birch. “Enterprise Angels worked with us to secure funding from SCIF, EA members, EA Fund 2 and wholesale investors on AngelEquity. The exciting progress that we’ve made has helped us on our journey, including securing distribution of Quantec Ingredients products in China.” Also based out of the Quantec’s technical team from left, Dr Judy Bragger, Dr Colin Ogle and managing director Dr Rod Claycomb. developed a unique and powerful enzyme trademarked as Aloxsyn, which remediates damage from oxidation of fats in cell membranes. Chairman and major shareholder, Mark Backhaus, says the initial focus is on enhancing the survival and longevity of sperm from bulls used in the dairy industry and on improving the ability of cows delighted with the confidence in our company expressed by investors and the New Zealand Government following extensive due diligence. “We are particularly grateful for the encouragement and support that we have received from Enterprise Angels, Ice Angels and NZVIF. This new injection of capital allows us to accelerate Zealand, connecting experienced investors with entrepreneurs and innovators to assist them in obtaining funds as well as skills and expertise. A member of the Angel Association of New Zealand (AANZ), Enterprise Angels promotes and facilitates investor education by providing education events, active learning CUSTOMER AD ID WAIKATO TOYOTA AU-7515642AD (100%) PUBLISHING DESIGNER to conceive. our scientific and IP development programmes, as well as and best practice procedures. opportunities on actual deals 18/01/17 SALES REP MANISH.KHETARPAL PUBLICATION PIAKO POST Innovation Park, Synthase “However, Aloxsyn is a OUTSOURCER Biotech has reached its maximum investment target, with be applied in many situations, “Synthase has had an excep- Enterprise Angels has facili- ‘platform PROOFED technology’ 14/01/2017 that 11:56:20 can our p.m. commercialisation effort. SIZE 26.2X18 Since launching in 2008, an injection of $800,000 in the start-up’s first capital raising outside of its founding group, including extension of shelf life in foods, providing longer storage of human organs and tissues tional 12 months, including winning a grant of $950,000 from Callaghan Innovation and tated the investment of more than $22 million in 53 early stage and established businesses including funds from the New for transplantation, or biopsy, being listed as a finalist in the across a variety of industries, Synthase Biotechs’ team from left, executive director, Zealand Venture Investment and in human health itself,” he NZ Innovation Awards.” driving economic and business Andrew West, operations manager, Janine Cowling, senior Fund (NZVIF) and existing says. Tauranga-based Enterprise development within the Bay of scientist, Alex Hennebry, chief technical officer, Steve investors. 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WAIKATO BUSINESS NEWS January/February 2017 17 Addressing global tax avoidance With the world becoming increasingly globalised, perceived tax avoidance by international enterprises through multicountry business structures has been attracting increased media and public attention. There is widespread concern that multinational corporations have the ability to structure their businesses across different countries to minimise their overall tax cost, as a result of different tax regimes in individual countries. The Organisation for Economic Cooperation and Development (the OECD) has released a series of recommendations designed to close tax loopholes and make tax more equitable across the globe. Improvements to the world’s tax systems mainly focus on removing these deficits and increasing confidence in global markets. Estimates place the annual tax loss to governments across the world at between $100-$240 billion The New Zealand Government intends to adopt the full range of OECD recommendations to combat hybrid mismatch arrangements US dollars. Data released by the IRD shows that approximately half the entities registered in New Zealand with turnovers greater than $80 million are foreign owned, with a further 25 percent involved in international business operations. Due to the significance of these entities on our tax base, the New Zealand Government issued a discussion document earlier this year, seeking to adopt the majority of the OECD recommendations. The Government tax policy work programme for 2016/17 includes a list of measures focused on ‘International Tax and Base Erosion and Profit Shifting (BEPS)’ of which one of the most complex issues is addressing ‘hybrid mismatch arrangements’. The ‘hybrid mismatch’ problem arises when multinational entities structure their business affairs to take advantage of different tax rules in different countries. A common example of this for businesses operating in both New Zealand and Australia is the use of loans structured as convertible notes. Under New Zealand tax law they are treated as debt instruments, with interest payments being tax deductible. Under Australian rules they are treated as an equity instrument – so the ‘interest’ payments are treated as dividends with the benefit of tax credits, which results in no tax to pay on the income. This can result in a mismatch: the NZ Company receives a tax deduction in New Zealand with no corresponding taxable income in the Australian Company. A further example is the situation where a US parent company has a 100 percent owned NZ subsidiary. Under New Zealand tax rules, any payments made to the US parent can be tax deductible, however under US domestic law the receipt of this income can be treated as non-taxable. Again, this results in a mismatch: there is a tax deduction in New Zealand with no corresponding taxable income in the US. The New Zealand Government intends to adopt the full range of OECD recommendations to combat hybrid mismatch arrangements. The proposed changes are complex, however they aren’t just relevant for global giants; the rules will need to be understood by all New Zealand businesses that engage in cross-border transactions, even relatively small NZ companies doing business New vet practice reflects Pokeno’s growth Pokeno’s fast-growing population now has another reason to call the area home – the recent opening of the town’s first veterinary surgery. CareVets Pokeno Ltd opened for business little more than a month ago, and newly-installed veterinarian Emma Hill says the response from the community so far has been “really positive”. “We’ve been out and about letting people know that we are open for business … everyone seems really pleased to have a vet right here. It’s seen as a real plus for an area that is growing this fast,” she said a week before Christmas. Heading the move to open the Pokeno clinic was CareVets director Keith Houston, a veterinarian with more than three decades’ experience and the man who started and funded the national CareVets group more than 15 years ago, principally to make high quality pet care more accessible to communities. Dr Houston said the new surgery staff would work closely with veterinarians at The Vet Centre Pukekohe, The Vet Centre Waiuku, and Byerley Park horse centre near Karaka, allowing Pokeno’s animal-owners to tap into an impressive network of knowledge and skills. “The new clinic has been established to act as an extension of our services to the entire area,” he explained. “The housing growth in Pokeno has been the impetus to provide a local pet service, as well as our rural veterinary servicing of dairy, equine and small block holders. Our team members enjoy sharing their knowledge and supporting each other.” The Waikato District Council has developed a structure plan to help manage Pokeno’s unprecedented growth, and to support its increasing population through the provision of appropriate amenities and services. Council statistics already show a rapid increase in the number of registered dogs in the area, with some 360 more dogs registered during 2016 than in 2013. Similar increases are likely in number of other pets and lifestyle animals. Having local veterinary skills close to hand is being viewed as an important step in providing for that growing population. CareVets Pokeno veterinarian Dr Hill brings six years of widespread experience to the role, working most recently out of the Waiuku Veterinary Surgery. “Much of the work I did in my first three years as a vet was with small animals,” she said. “Since then, I have added in a mix of equine and farm animals, in Australia. Some of the key changes proposed to be implemented in New Zealand include: • Denial of a tax deduction for a payment to an overseas related entity, where the payment is not treated as taxable income. • Where foreign dividends received by a New Zealand company would normally be non-taxable, they will become taxable if there has been a tax deduction in the overseas company. On a practical level, this is most likely to affect: • New Zealand businesses with loan or share arrangements with businesses in other countries; • New Zealand branches of foreign companies, or NZ companies with overseas branches; • New Zealand companies, partnerships and trusts with overseas owners or investors, or with foreign investments. Due to the global nature of these arrangements, the New Zealand Government recognises that our domestic policies can only be effective if the OECD recommendations which means I am very familiar with animals of all sizes – pretty much ready for anything. “The local clinic is equipped to handle standard veterinary TAXATION AND THE LAW > BY HAYDEN FARROW Hayden Farrow is a PwC Executive Director based in the Waikato office. Email: hayden.d.farrow@nz.pwc.com are implemented worldwide. The Government is therefore closely following the changes adopted by the UK, EU and Australia before the new rules are passed into legislation here. However the US and some Asian countries are currently reluctant to adopt the OECD recommendations, so it will be interesting to see how the international markets react. In addition to addressing hybrid mismatch arrangements, other measures aimed at improving global tax standards include an increased focus on transfer pricing and the robustness of double tax agreements. Transfer pricing rules have been on the agenda for many years; they seek to ensure that where goods and services are sold between related parties of a larger enterprise, those sales take place at a fair value, so that an appropriate amount of revenue is recorded in the correct entity. Although these rules have been in place for some time, the increased focus on international arrangements means that IRD is likely to monitor such arrangements closely, so it is important CareVets Pokeno veterinarian Emma Hill, left, with vet nurse and clinic receptionist, Jacqui Langley. consultations and minor surgery such as de-sexing and the like. Anything more complicated than minor surgery would be done in Pukekohe, which is just that New Zealand businesses ensure their transfer pricing arrangements are fit for purpose. The Government is also working closely with the OECD and current treaty partners to ensure international agreements remain fit for purpose. The double tax treaties with China and Korea are currently being re-negotiated; as key trade partners any New Zealand businesses operating in these countries will need to keep a close eye on resulting changes that could impact existing contracts. The proposed changes are not simple. Recommendations that result in legislative change will need to be comprehensively understood by affected entities. Compliance with these intricate changes will have the potential to cause major headaches for New Zealand business looking to overcome the technical and practical difficulties of business on the international stage. The comments in this article of a general nature and should not be relied on for specific cases. Taxpayers should seek specific advice. 15 minutes away.” Dr Hill will be supported at CareVets Pokeno by a veterinary nurse Jacqui Langley, who will also take care of front of office. New appointment to oversee TGH and Tainui relationship Tainui Group Holdings (TGH) has announced the appointment of Pierre Tohe to the role of general manager engagement. TGH chief executive Chris Joblin says Mr Tohe, who is of Waikato-Tainui descent, is a proven leader in Maori business. “Pierre’s tribal affiliations, years of experience as head of Maori business at BNZ and his legal background, will help us stay joined at the hip with Waikato-Tainui and will open up the opportunity to explore investment partnerships at the hapu, marae and incorporation level,” Mr Joblin says. “Pierre’s appointment is in line with our strategy to appoint and develop tribal members within key roles in TGH where they have the skills and qualifications to advance the commercial, cultural and social outcomes of the wider tribe. His knowledge of tikanga will ensure we continue to work in culturally appropriate ways in line with the values and aspirations of Waikato-Tainui,” Mr Joblin says. Pierre was born in Huntly and is currently a trustee at Taniwha marae with family links to Waahi and Kaitumutumu marae. He has been the Aucklandbased head of Maori business for BNZ since August 2011, following earlier roles as in-house legal counsel and senior solicitor for the BNZ since 2003. Earlier in his career Pierre also worked at leading law firm Buddle Findlay as a solicitor for five years after graduating from the University of Auckland with a Masters of Laws (LLM) in 1998. Pierre says he is excited about the prospect of putting his experience to work for his own iwi. “Over the past five years, I have seen the difference made by effective iwi investment strategies. Waikato-Tainui and TGH have made a great start as pioneers of economic development since the 1995 settlement, and I’m excited to put my shoulder to the wheel. I have always had a vision to return and work for Waikato- Tainui and believe we will unlock great things by working as one across the tribe,” he says. Pierre will start with TGH in early February. Tainui Group Holdings new general manager engagement Pierre Tohe.
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Waikato Business News January/February 2017

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