Rule changes for overseas investors
There are several rule changes that came into force on 5 July 2021 around overseas investment and the following article highlights the most significant changes. There is also an update to the National Security and Public Order (NSPO) requirement bringing financial institutions into the NSPO regime.
5 July changes
Removing transactions and new exemptions
Several changes include removing a range of low-risk transactions from the regime, such as:
- incremental acquisitions that do not cross a control threshold (25%, 50%, 75% or 100%)
- lease transactions in sensitive land that are less than 10 years
- transactions in businesses that are incorporated and listed in New Zealand and are widely held.
In addition, there are new discretionary exemptions including a national interest test exemption from the definition of “non-New Zealand government investor” for some overseas government investors.
New tax requirements
Investors applying for consent to invest in a significant business asset must now provide tax information. This information will be passed directly to Inland Revenue.
Refined national interest assessment scope
Changes have been made to refine the scope of the national interest assessment. These include:
- an increase in the ownership threshold for transactions captured from over 10% to over 25%
- unrelated overseas governments will not be aggregated for assessing if the threshold is met
- some overseas government investors may be eligible for an exemption
- how assets are to be used is now in scope, not just whether the business is considered a “strategically important business”, for example, otherwise standard technology that is to be used in critical infrastructure projects.
Standalone investor test
Investors can now apply for a standalone investor test independently of submitting a consent application. For example, investors can apply for a standalone investor test at any time to assess their suitability to own and control sensitive New Zealand assets in preparation for being part of a wider investment group/entity.
Simplified applications for repeat investors
Repeat investors who have met the new investor test will not need to satisfy the investor test each time they apply for consent (provided there are no substantial changes since the last time they obtained consent).
National Security and Public Order
The National Security and Public Order (NSPO) notification regime came into force on 7 June 2021. The NSPO notification regime covers strategically important business investments that do not otherwise require consent.
From 29 July registered banks with assets over $80 billion and businesses involved in financial market infrastructure will become ”strategically important businesses” and transactions may need to be notified under the NSPO requirements.
Several improvements have been made to the webforms in response to user feedback. The improvements include:
- extending or removing field character limits
- adding more commentary fields
- rewording or adding explanatory text to some questions
- other improvements such as indicating mandatory fields and allowing additional contact people to be listed.