Country report New Zealand

Economic overview

The country’s economy was based on the agricultural sector for a long time. To maintain stability and prosperity, work has been done on the development of sectors such as tourism and industry on which the brilliant economic situation of the country that you will find during your tour of New Zealand is based.

The country’s GDP reaches a little over 168 billion dollars and the annual GDP per inhabitant is around 30,400 dollars (€27,300). The unemployment rate is very low, only 3.5% and the growth rate is around 2.5%. The inflation rate is also low, remaining at 1.3%. Public debt represents about 30% of GDP and the value of exports is slightly higher than that of imports. New Zealand’s main trading partners are Australia, the United States, Japan, China, Malaysia, Singapore and Germany.

After the impact of the pandemic, New Zealand’s GDP is expected to grow by 1.8% in 2023. Inflation has reached the highest levels of the last 32 years, well exceeding 7%. While public debt remains low by international standards, household indebtedness has increased significantly. GDP per capita and productivity growth are weak. The unemployment rate is at frictional levels.

The largest contribution to overall New Zealand GDP growth came from private consumption growth. The demand for consumer goods from Asian markets, especially from China, will be able to support export growth in the coming years, helping to improve the overall performance of dairy exports.

Main sectors of industry

The most important industries are the agri-food industries, linked to breeding, and those that produce consumer goods (textile and mechanical industries). The energy supply is ensured mainly by hydroelectric, thermal and geothermal plants.

The agricultural sector employs 7% of the population and contributes less than 4% to GDP. Most of the production is intended for export. Fishing also plays an important role and the livestock sector supplies the whole world with wool, dairy products and meat. Ram farming is extensive and the Easter lamb that ends up on so many tables often comes from New Zealand.

The industrial sector employs a little less than 20% of the population and represents over 25% of GDP. The main industries of the country concern the agri-food sector, the textile sector and the mining sector.

The tertiary sector, and especially the tourism sector is booming. About 75% of the population works in the service sector thus creating about 70% of the country’s wealth. If the New Zealand economy is so prosperous it is essentially due to the dynamism of this sector.

Taxation for businesses in New Zealand

The national tax system is easy to understand when compared to that of many other countries.

Taxes are administered by the Inland Revenue Department (IRD).

Individuals who have their domicile in New Zealand, or are present in the country for at least 183 days in a year, are considered tax residents. Resident taxpayers are taxed on income produced wherever they are produced and the domestic legal system recognizes them a credit for taxes paid on foreign income equal to the lesser of the amount of foreign tax paid and that which would have been due if this income had been taxed in New Zealand. Non-resident subjects are taxed only on income produced in the territory of the State.

The corporate tax rate is 28%. Taxable persons are all tax resident and non-resident entities, including foreign branches.

A company is tax resident there if it is incorporated in the territory of the State, or if the head office or management is in New Zealand.

For resident entities, the tax base is represented by income generated everywhere, while non-resident individuals are taxed on income originating in New Zealand. In particular, the taxable includes, among other things, capital gains, and the law recognizes, among the deductions, the costs of Research and Development, interest expense, outstanding debts, donations to certain charitable organizations operating in New Zealand and 50% of the entertainment expenses.

Sanctions are generally not deductible if imposed in response to violations of regulations or statutes. The company is entitled to the recognition of foreign tax credit which, however, cannot exceed the tax that would be payable in New Zealand on income that has discounted tax abroad.

Losses can be carried forward to reduce future years without a time limit, provided that at least the continuity of 49% of the shareholding remains, while the carry forward is not envisaged.

However, starting from 1 April 2020, if the shareholding structure changes such as to jeopardize the required condition of continuity of 49% to guarantee the deduction of losses in subsequent tax periods, the carry forward will be guaranteed in any case, if the legal entity continues to carry out the same activity.

Dividends and interests are respectively subject to withholding tax of 33% and 28% if the recipient is a resident; while if the recipient is not a resident, the rates of 30% and 15% are applied, or lower rates if a double taxation treaty has been stipulated.

Investing in New Zealand

Infrastructure: To aid business, the New Zealand government created a special Infrastructure Commission in February 2019 to support infrastructure development. The plan is available online on the New Zealand Infrastructure Commission website. The 30-year strategy includes the creation of the Infrastructure Pipeline tool for financing infrastructure projects. In support of the country’s economic capacity, funding for investments to create infrastructures in strategic areas where concrete growth opportunities exist has grown.

Telecommunications: The improvements made to New Zealand TLCs with the expansion of broadband and new fiber optic cabling have created interesting opportunities to invest in infrastructure in the sector (mobile telephony, data centers and the Internet).

Tourism: The tourism sector is constantly growing and in the coming years New Zealand will be committed to expanding its offer of health and wellness centers (spas, integrated spa-resort chains and medical tourism), luxury hotels, golf courses , conference centers.

Health and Wellness: Thanks to the variety of outdoor activities and abundant natural resources, New Zealand lends itself well to infrastructural development in the health and wellness sectors. Geothermal areas with thermal springs associated with treatments derived from traditional Maori medicine, quality food and wine, offer good opportunities for specialized hotels and spas in many areas of the country.

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