A Gear Shift for the NZ Entrepreneur Visa

The Government recently made some adjustments to the rules for visas which allow people to do business in New Zealand, known as the Entrepreneur Visa.  This policy has been notoriously tough.  We have previously warned about how hard it can be to get approved.  That is probably still the case, but Immigration is getting the message that some of its settings are . . . well, OTT.

Take the “working capital” requirement.  You have to make a “capital investment” of at least $100,000, but none of it could be “working capital” which was (for instance) cash in a bank account to help pay the bills.  You couldn’t count any assets or cash which was to be used in the “day-to-day running of the business”.  That’s all very well if you are building a big manufacturing plant; but what if you want to set up an IT company to develop cloud applications?  Nowadays you would have to buy an awful lot of servers, PC’s and desks before you had spent your $100K.

The trouble was that nobody was sure where the “working capital” blanket ended.  You buy a fleet of trucks to start a haulage business.  Those trucks are out on the road “day-to-day”, hauling stuff.  Are they working capital too?  People concluded that the only way to be safe would be to buy a building – whereas in fact most businesses rent their premises.  It was all a bit of a nonsense, and it boiled down to a fear that Immigration could exclude all capital put into a business except what it chose to include.

Fortunately, “working capital” has now disappeared from the policy.  Instead, people are allowed to include all the money and assets that they put into a business toward that $100K investment threshold, except for:

  • passive funds or investments such as term deposits
  • things for personal use such as a family home or car
  • salaries paid to the visa applicant’s family
  • investment in residential property (unless the property is actually a new development which is the migrant’s business venture itself)

That is, it’s all in unless it’s on that list.  Quite a change in emphasis, and it should be a lot less painful to work with.

On a similar topic, Immigration has also defined a “residential property development” for the purpose of the Entrepreneur visa.  It must be a new development (not a renovation), it must be able to make a profit when it is sold or rented out, and the migrant or their family cannot live in it once it is completed.  The definition lines up with what is an “acceptable investment” for Investor visa applicants.

It also fits with one of the Government’s big problems – the country is woefully short of houses, and they aren’t being built fast enough.  We did refer to this before, and it’s one of those topics of pub conversation around the country, because short supply means higher prices.

How attractive will it be for overseas business people to get into building houses in New Zealand?  Well, maybe.  For one thing, it will take some time before housing demand is met, so it’s unlikely that prices will stop rising.  The Loan-to-Value Ratio has recently been pushed up, tax reporting rules have just come in to identify offshore buyers, and people will be taxed if they sell a rental property within 2 years of buying – all in order to discourage speculation.  But interest rates are not bad at the moment, and New Zealand’s currency has weakened since the middle of the year.

Besides, the 2-year tax rule shouldn’t be an issue for those applying for the Entrepreneur visa.  The Entrepreneur process starts with Work Visas for a total of 3 years.  In many cases they will have to keep the development project going for at least 2 years before they can apply for Residence.

For those who want to build their new land empire, New Zealand might be the place to come to.  Put aside for one moment the concerns about Godzone Country being sold off overseas, slice by slice.  We need houses, lots of them, and soon.

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About Simon Laurent, Lawyer

Principal of LaurentLaw Barristers & Solicitors. NZ immigration law specialist.
This entry was posted in Immigration Visas. Bookmark the permalink.

One Response to A Gear Shift for the NZ Entrepreneur Visa

  1. Glen says:

    Hi. Does the capital investment include the purchase price of an existing business or franchise?

    Like

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