17+ Pros and Cons of Doing Business in New Zealand (Explained)

New Zealand is one of the world’s five top business-friendly nations. However providing insight into the investment climate and local awareness of the legal, accounting, and tax system are important for success.

New Zealand has rolled out a welcome wagon for foreign direct investment which offers opportunities, rewards, and a stable business climate. However, supporting direct awareness of the legal, accounting, and taxing system are important for any overseas enterprise and there are still many challenges to be faced when establishing on the Pacific Island.

Benefits of Doing Business in New ZealandDrawbacks of doing business in New Zealand
It is an open market.If a business under the sole trader structure is doing so well, there are chances of being put in higher tax brackets.
Fund movement in New Zealand is not restricted.Houses are expensive to rent including business offices and shops, especially in Auckland.
It has very little corruption if any.Traveling overseas and importing goods are very expensive.
Limited regulations and restrictions and one can almost invest in any sector.The high cost of living.

Advantages of doing business in New Zealand

1.      A Conductive Atmosphere

Given its status as a small country, New Zealand, due to the economic growth and stability potential, has developed itself as one of the best spots to set up a business. Last year’s steady GDP growth of 3.3 percent shows that consumer expenditure has risen steadily over the past year, showing no signs of slowing down. This makes sitting on this wave of economic growth a perfect place for you.

Besides that, the government of New Zealand seems both able and willing to promote entrepreneurship and industry. Historically, it has given strong infrastructure facilities for these activities with New Zealand government grants for entrepreneurship, coaching, and reasonable price professional counsel for owners to structure and operate their companies.

2.      Legal criteria are transparent

There is also no need to worry about getting bogged down by unnecessary bureaucracy and legal constraints when it comes to starting a New Zealand company.

An entity may be subject to slightly different regulations, depending on which business arrangement you want – be it a partnership, a limited partnership, a corporation, or a sole trader. Some of these procedures include registering for the purposes of paying Goods and Services Tax (GST), registering as an employer, and applying for an Inland Revenue (IRD) number to allow the company to run. The paperwork to set up a company can nevertheless be done online in a matter of hours, with great ease and convenience.

3.      A Community for Supporting Startup

You’ll need all the support that you can get when you first dive head into opening a company. This is why it is important that you have a resource community that you can tap on. The startup scene in New Zealand seems to be able to provide just that, with working spaces abundant, and a friendly, tightly knit community full of like-minded peers. If you need guidance, a hearing ear just someone to ricochet off with concepts, you’ll find no scarcity.

4.      A Tax Forgiveness Program

Sadly tax is among life’s unavoidable facts. Tax often tends to be a concern for small businesses given how it impacts the company’s income. A corporation pays tax on its net income, depending on the number of products and services that it sells. This is influenced by the type of company you are running, and the profits you receive in the year.

Happily, New Zealand’s tax system is fairly forgiving. Two of the tax, reductions include a 6.7% discount on taxes for people in self-employed roles or companies, as well as a range of exemptions for a partnership’s sole trader and partners if their annual income falls below NZD 38,000.

Disadvantages of doing business in New Zealand

1.      Having to deal with planning permission

There have been six processes associated with obtaining building permits which take a total of 89 days. Companies must obtain resource consent (planning), building consent, and district council inspection, as well as Watercare ‘s approval of CCTV and telephone, water, and sewer link.

2.      Getting electrical control

Having electricity is the most arduous part of setting up a New Zealand company, requiring five procedures that take 50 days to complete. It may take some time to negotiate with the service company, especially in the early stages of the process.

3.      Having credit and investor security

The robust financial services sector and strong regulatory environment in New Zealand give investors good protection and make credit obtaining relatively easy. New Zealand is ranked fourth in the world by the World Bank and IFC to get credit and first for investor protection.

4.      Pay taxes

New Zealand’s fiscal climate is driven by headline payments, which significantly streamline the process. There are, however, other taxes that can be very time consuming, such as the injury compensation Corporation (ACC) levy of VAT returns, which together take well over 100 days to complete.

5.      Trading on frontiers

There is a heavy dependency as an island nation on rapid and productive cross-border trade. When exporting, there are five documents to prepare, and six while importing, which take on average 10 days to complete.

6.      Contract Compliance

When executing contracts, there are 30 procedures involved that take 216 days altogether. The attorney’s expense amounts to about 22 percent of the lawsuit, while the court costs are significantly smaller, standing at about 2 percent of the total lawsuit.

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