About New Zealand
New Zealand is ranked by the World Bank as the easiest country in the world in which to do business and as the third freest economy in the world, according to the Heritage Foundation.
Flexible licensing and established labour laws and regulatory frameworks have positioned New Zealand as one of the world's most efficient and competitive entrepreneurial environments. This is further enhanced by a competitive financial sector which offers advanced, sophisticated financial instruments to boost business activity. Trade openness, supported by low tariff rates and few barriers to foreign investment, have also made New Zealand an attractive destination for trade and investment.
The historic signing of the Australia-New Zealand Closer Economic Relations (CER) Trade Agreement strengthened economic ties between the two countries across innumerable sectors. Labour market regulations have been eradicated between the two countries, allowing free labour mobility, while many other areas of regulation – aviation, healthcare and food safety, for example - have been standardised to form a Single Economic Market (SEM). China is New Zealand's largest trading partner, followed by Australia.
With New Zealand's geographical location and distribution links with major markets, it is an unrivalled base to tap into Europe, North America and Asia for ease of trade and investment flows.
What solutions are available in New Zealand?
|Interest Optimisation||Maximise your interest yield from for your balances held with the bank.|
|Notional Pooling||Cash balances in different accounts are notionally offset to derive the net balance, which is then used to calculate interest.|
|Sweeping/ Zero Balance Account (ZBA)||ZBA are checking accounts with zero balances where funds are physically swept to eliminate excess balances and maintain greater control over disbursements.|
|In-house Banks (IHB)||In-house banks provide corporate treasurers with another method of centralising and consolidating their business.|
|Intercompany loans||Similar to bank loans, intercompany loans refer to lending between entities within the same group.|
Corporate Treasury in New Zealand
The World Bank ranks New Zealand as the easiest country in the world in which to do business while the Heritage Foundation classifies it as the third-freest economy in the world. Here we highlight some of the key benefits relevant to treasury and cash management.
Financial Market Development
- The World Economic Forum ranks New Zealand first in the world for financial market development in The Global Competitiveness Report 2017-2018.
- It ranks New Zealand third in the world for the soundness of its banks, while it rates the country top for legal rights and ease of access to loans.
- New Zealand has good business infrastructure, an educated English-speaking workforce and a sound legal environment.
- There are no foreign-exchange controls in New Zealand.
Sophistication of Banking Systems
- There are 26 registered banks in New Zealand, 11 of which are branches of foreign banks.
- New Zealand’s foreign-exchange market has an average daily turnover of USD10 billion, accounting for 0.2% of global turnover (Bank for International Settlements triennial global survey 2016).
- The size of New Zealand’s debt market has more than doubled in the past decade, with both government and corporate bonds available. Non-resident entities can also issue bonds in New Zealand dollars, known as Kauri bonds. Outstanding bonds with a value of NZD25.39 billion are listed on the NZX Debt Market.
- The banking industry is regulated by the Reserve Bank of New Zealand, which is also the country’s central bank. Regulations are in line with international standards.
- The corporate income tax rate is 28%.
- Resident companies are taxed on worldwide income whilst non-resident companies are taxed on New Zealand-sourced income.
- The branch of foreign company’s profits are taxed at the same rate as resident company’s profits. There is no branch profits remittance tax on the remittance of profits to the head office by the branch of a foreign company.
- The standard rate for Goods and Services Tax (GST) is 15% with certain goods and services being zero-rated whilst others are exempted.
- Interest expenses that are used for business purposes are generally tax deductible. However, the deductibility of the interest is restricted when the company’s allowable debt level exceeds the safe harbour debt to asset ratio.
- There are no stamp duties in New Zealand.
- Withholding tax (WHT) of 33% is charged on certain types of dividends, and rates of 10.5%, 17.5%, 28%, 30% or 33% are charged on certain types of interest earned by resident companies. For non-resident companies where no tax treaty is in place, WHT of 0%, 15% or 30% is charged on dividends and 15% on interest. Where a tax treaty is in place and the non-resident can provide the Certificate of Residence, WHT ranges from 0% to 15% for dividends and 0% to 15% for interest.
- New Zealand has tax treaties with around 40 countries and territories.
- New Zealand is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.
Benefits for Regional Treasury Centres
- New Zealand has well-developed financial markets.
- It offers proximity to fast-growing Asian markets, and has no currency controls.
- New Zealand has one of the least regulated free-market economies in the OECD, with a sound business infrastructure and a strong rule of law.
- It is a member of the Asian Payment Network, a common payment settlement platform within the Asia-Pacific region.
- Domestic and cross-border notional pooling and cash concentration are permitted.
- There are 26 registered banks in New Zealand (all banks must be registered with the Reserve Bank of New Zealand), 11 of which are branches of foreign banks. In addition, there are 25 non-bank deposit-takers, which include credit unions and finance companies.
- The banking sector is dominated by Australian-owned banks, with the four largest banks in New Zealand being: ANZ New Zealand, Bank of New Zealand, ASB Bank and Westpac New Zealand. Together they control 82% of total assets.
- Residents and non-residents may hold foreign and domestic currency accounts both domestically and overseas. Domestic currency accounts are freely convertible into foreign currency.
- Interest is available to savings and current accounts as well as demand deposit accounts.
Legal and Regulatory
- The Reserve Bank of New Zealand's Prudential Supervision Department oversees the banking sector.
- The core payment systems are regulated by a self-governing body, Payments NZ Ltd, an industry-led regulator set up by New Zealand’s main banks. The payments systems it governs are the bulk electronic clearing system (BECS), consumer electronic clearing system (CECS), high value clearing system (HVCS) and paper clearing system (PCS). There are currently 12 participant banks and 34 members who are payment providers.
- A company is resident if it is incorporated in New Zealand or is managed or controlled in New Zealand.
- Foreign exchange controls are not applied in New Zealand.
- There is anti-money laundering and counter terrorism financing legislation in place, and investigations are overseen and conducted by the New Zealand Police Financial Intelligence Unit (NZP-FIU), which is also a member of the Egmont Group.
- New Zealand is a member of the Financial Action Task Force (FATF).
(Exchange and Settlement Account System)
New Zealand's Real-time Gross Settlement (RTGS) system
(High-Value Clearing System)
Electronic high value exchange and settlement system
(Bulk Electronic Clearing System)
Bulk electronic exchange and settlement system
(Consumer Electronic Clearing System)
Exchange and settlement system
(Paper Clearing System)
Paper-based exchange and settlement system
- Are only automated.
- High-value and urgent credit transfers are cleared and settled through HVCS in real time.
- Low-value, non-urgent and bulk credit transfers are cleared through BECS same day.
- Used for payroll, supplier and third-party transactions.
Direct Debits (auto debits)
- Available for low-value, regular payments such as utility bills.
- Processed through BECS same day.
- Credit and debit cards are the most popular modes of payment by volume, with contactless payments - ‘tap and go’ – experiencing the strongest growth.
- The main credit card brands are Visa and MasterCard, with American Express and Diners Club also in circulation. They are cleared by their own international card schemes.
- Debit and credit card payments are cleared through CECS.
- There are two EFTPOS network providers: Paymark (processes 75% of EFTPOS transactions) and EFTPOS New Zealand (processes the remaining 25%).
- Paymark is the national payment network operated by the big four Australian-owned banks: Westpac, ANZ, BNZ and ASB.
- New Zealand Post offers reloadable e-purse card schemes.
- The Financial Markets Conduct Act 2013 (FMC Act) took an early position on financial technology (fintech) companies by allowing flexibility and innovation and supporting online capital funding options within the financial markets. This relinquished the need for a regulatory sandbox.
- The Financial Markets Authority is overseeing developments in the fintech sector.
- Digital wallets are increasing in popularity, but credit and debit cards continue to be the most common mode of payment. Popular digital wallets are Android Pay and Apple Pay, and local providers are ANZ’s goMoney Wallet and ASB Virtual Wallet.
- Mobile payments have had a relatively slow initial uptake, however, they are fast increasing in popularity with payments made by mobile apps, such as Square and Apple Pay, and wearable devices, such as FitBit Pay and Garmin Pay.
- Persons working in NZ cryptocurrency markets or services are required to abide by the FMC Act and, with respect to anti-money laundering, the Financial Service Providers (Registration and Dispute Resolution) Act 2008. The Financial Markets Authority classifies exchanges, wallets, deposits, broking and ICOs as financial services that fall under the FMC Act.
- Cryptocurrencies are not legal tender.
Cash, Cheques and Money Orders
- According to the Reserve Bank of New Zealand, contrary to cashless trends, the amount of cash in general circulation continues to grow.
- However, cheque usage is in significant decline, more than halving in four years (Payments NZ, 2017), as electronic payments become increasingly popular for both high- and low-value transactions.
- Cheques are truncated and then processed through the PCS.
- Intrabank cheques can be cleared in real time or within 24 hours (depending on the bank) and interbank cheques can take up to three days.
- New Zealand’s PostShop offers Western Union remittance services for international money orders, but no longer sells domestic money orders.
1 (Progressive) max rate for incomes over NZD70,000
NZ Could Be Cashless By 2028
New Zealand could be a cashless society by 2028, according to a survey by MYOB. More than a third of New Zealanders think cash will no longer be used in the country within ten years, while 42% believe it will be gone within 20 years. Instead, 71% of people prefer to use bank transfers, 64% favour online payments and 40% use credit cards. The study also found that only half of New Zealand businesses still use cash, while 12% have shifted to mobile payments.
Read more about the development here.
ANZ Launches Google Pay
ANZ has launched Google Pay in New Zealand for customers with Android smartphones. The move enables credit and debit cardholders to use the mobile wallet to make payments anywhere in the world where Google Pay is accepted. Google Pay replaces ANZ’s current Android mobile payment app, goMoney Wallet, which is being phased out this year. The bank also offers Apple Pay for customers with iOS devices.
Read more about the development here.
This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in New Zealand and take advantage of our innovative solutions to empower your business. Click here to find out more.
Sources:World Bank, Heritage Foundation, CIA World Factbook, World Economic Forum, PwC, NZX Debt Market, Reserve Bank of New Zealand, Bank for International Settlements, Deloitte
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