The Government has introduced further amendments to the Overseas Investment Regulations 2005 (the Regulations) to ensure New Zealand complies with its obligations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the CPTPP Agreement) and various other international agreements New Zealand is a party to.
The CPTPP Agreement requires New Zealand to increase the threshold trigger for an investment in “significant business assets” from NZ$100 million to NZ$200 million for non-government investors of the 10 other CPTPP Agreement nations. The new NZ$200 million threshold will also apply to non-government investors from nations in which New Zealand has existing trade agreements with “most favoured nation” obligations, such as the Republic of Korea, Hong Kong and the People’s Republic of China.
The new threshold for these nations is similar to the existing “Australian non-government investor exemption” (although the monetary threshold is lower, with the current threshold for Australian non-government investors being NZ$516 million). In our experience, the Australian non-government exemption provides material benefits to Australian investors from time to time. In particular, bids from Australian investors that are not conditional on Overseas Investment Office approval can prove more attractive to a vendor in a competitive bid process where the value of the NZ assets or real estate falls between NZ$100 million and the Australian threshold.
However, like the Australian non-Government investor exemption, the application of the new exemptions is complex and some (fairly standard) corporate structuring arrangements can result in the exemption being unavailable. For example, acquiring assets through a New Zealand Special Purpose Vehicle may mean that the exemptions will not apply. Furthermore the new threshold exemptions only apply to significant business asset transactions, not sensitive land. Accordingly, it remains to be seen how frequently the new threshold exemptions will actually be utilised by investors from the CPTPP Agreement nations and our other affected trade partners. The threshold remains at $100 million for trading partners such as the United States of America and European Union.
The new regulations come into force on 30 December 2018, the same date the CPTPP Agreement comes into force.
If you have any questions or would like to discuss the CPTPP Agreement further, please contact the authors or your usual Bell Gully adviser.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.