INTERNATIONAL BAR ASSOCIATION IMMIGRATION LAW CONFERENCE NOVEMBER 2017 NEW ZEALAND IMMIGRATION LAW: ENTREPRENEUR V INVESTOR

Transcription

1 INTERNATIONAL BAR ASSOCIATION IMMIGRATION LAW CONFERENCE NOVEMBER 2017 NEW ZEALAND IMMIGRATION LAW: ENTREPRENEUR V INVESTOR DJ Ryken Ryken and Assciates P O Bx 501, Auckland david@rykenlaw.c.nz

2 NEW ZEALAND IMMIGRATION LAW AND POLICY ENTREPRENEUR V INVESTOR Intrductin 1. New Zealand has an Entrepreneur Wrk Visa Categry which, after a business is established satisfactrily, 1 entitles the applicant t ldge residence under the Entrepreneur Residence Visa Categry. This is a transitinal prcess invlving actively setting up a business, usually emplying New Zealand citizens and residents, and then applying fr residence. In its current frmat, the plicy has a number f prblems which will be discussed belw. Fr thse that qualify under Investr 1 r Investr 2, they are invariably better ff using ne f thse categries. This paper will discuss the current entrepreneur settings (previusly called Lng-Term Business Visa (LTBV)) and then the current Investr 1 and Investr 2 settings, describing the mst recent changes. Entrepreneur Wrk/Residence (an active investment categry) 2. New Zealand has had an active entrepreneur categry fr mre than 18 years. It was previusly called the Lng Term Business Visa/Entrepreneur Residence Prgramme but was suspended and then reintrduced in 2014 as the Entrepreneur Wrk/Residence Categry. Please nte that as the first stage invlves a temprary visa applicatin there is n right f appeal t the Immigratin Prtectin Tribunal. The secnd stage (tw r three years later) is a residence visa applicatin and s there is a right f appeal t the Tribunal. 3. The Entrepreneur Wrk Visa Categry applicatin invlves a pints system assessment. Hwever, it is difficult t envisage a successful applicant having n prir business experience in running an enterprise if nt identical t, at least similar t the prpsed business. Further, it is difficult t envisage a successful business plan that des nt 1 This can invlve either a start-up r the purchase f an existing business r a share f an existing business.

3 2 invlve the investment f NZ $200k t $500k althugh smaller start-up businesses will be cnsidered. 4. In a recent circular, Immigratin New Zealand fficials have cmmented that the quality f applicatins that are being filed remains pr. An applicatin shuld be presented with a thught-thrugh business plan setting ut prpsed cstings and prfits ver a three year perid. Residence cannt nrmally be granted unless the business has perated fr at least 24 mnths and establishes self-emplyment. Tribunal case law lks carefully at self-emplyment as meaning sufficient prfit n which t earn a living. 5. Bth start-ups and buy-ins are feasible but with a buy-in, the number f New Zealand emplyees that are cunted are the additinal emplyees that are New Zealand citizens r residents, as a result f the buy-in. See table belw. 6. A recent change t the rules is significant. In shrt, it restricts this categry cnsiderably. In Amendment Circular (17 August 2017) an amendment was made t Immigratin Instructin BB3.15 f the Operatinal Manual cncerning certain characteristics that businesses need t demnstrate in their business plans. In shrt, they must be high-grwth, innvative r have exprt ptential. 7. This prbably puts an end t the purchase f franchise businesses r small retail-type prjects, althugh these have always been difficult in the entrepreneur wrk/residence settings. The requirements fr a business plan as set ut in BB3.15 are nw as fllws: i. The principal applicant s financial frecasts are realistic; and ii. iii. The principal applicant has sufficient relevant knwledge abut the prpsed business in the New Zealand business envirnment; and The principal applicant has dne sufficient market research int the New Zealand business envirnment and market fr their prpsed business, t ptimise their chances f succeeding; and

4 3 iv. The prpsed business meets at least ne f the fllwing three business characteristics identified in the bject f the Entrepreneur Wrk Visa Categry (BB1): High grwth Innvative, r Exprt ptential; and 8. The requirement at BB3: 15(iv), previusly illustrative is nw mandatry (r at least, it is mandatry t cme within ne f the listed categries). Entrepreneur Wrk Visa: Pints settings 9. Annexed t this Paper please find BB3.10 which sets ut the full table f the pints settings. 120 pints are needed and can be summarised as fllws: i. Pints fr age varying between (60 and ver 0 pints) pints ii. Relevant self-emplyment (business experience) pints iii. Relevant senir management experience (5-10 years) pints iv. Pints fr benefit t New Zealand 2 (1 new psitin) 10 pints (2 new psitins) 20 pints (3 new psitins) 30 pints etc v. Pints fr apprved exprt businesses (based n annual turnver) $200K 10 pints $300K 20 pints etc vi. Unique r new prduct/service t New Zealand 30 pints vii. Capital investment $200K + 10 pints $300K + 20 pints $400K + 30 pints etc viii. Bnus pints fr business utside Auckland 40 pints 2 I.e. emplyment f residents r citizens.

5 4 10. The fact that the first stage, i.e. the wrk visa stage, is a temprary visa nly is nt ften understd by applicants when cnsidering their ptins. This will nly lead t student visas fr primary and secndary schl aged dependent children and nt tertiary level dependants. Dependants f residence Investr 1 r 2 categry applicants themselves gain residence (with cnditins)), and s can attend tertiary level study as dmestic students. 11. A dependent spuse wh is emplyed in the business itself will nt cunt as a fulltime psitin f a New Zealand citizen r resident (and attract pints). An pen wrk visa hwever will be available t the spuse t wrk in any field, r fr any emplyer. 12. The applicant must identify nt nly their business experience but als the rigins f their funds. Althugh this prcess will nt be a full audit, it is nevertheless a detailed prcess. Clients planning an Entrepreneur Wrk Visa/Residence Visa prject are better t engage with an immigratin law specialist befre they engage with real estate agents r business agents endeavuring t prmte the sale f a particular business. There are few real estate agents wh understand the Entrepreneur Wrk Visa/Residence Visa prcess fully and accrdingly time and expenditure is frequently wasted n prjects that are nt viable, particularly nw given the abve restrictin that the business plan must invlve a business that will be either high-grwth, innvative r have exprt ptential, r at least ne f these characteristics. In additin prcessing time is significant and nt smething that happens while a cntract is left pending. Investr 1 and Investr 2: Residence categries 13. These tw plicies have recently been enhanced. Whereas the Entrepreneur Wrk Visa/Residence Visa applies t immigrants wh are able t remain in New Zealand permanently t actively run a business, the Investr Categries (1 and 2), d nt require such a high degree f presence in the cuntry.

6 5 14. A cmpetitive pint in favur f New Zealand s Investr Categries is that they are residence categries. When the visa is granted, it is nt a temprary entry visa but a Temprary Residence visa, with cnditins. The investment requirements must be cmpleted. In the case f Investr 1, this is fr three years and in the case f Investr 2, this is fr fur years. At the end f the investment perid and prvided that the presence requirement impsed n the principal applicant is met, the whle family will have permanent residence withut any further presence requirement in New Zealand, at any time in the future. 15. Unlike mst f the plicies in ther cmpeting jurisdictins, the glden carriage des nt turn int a pumpkin at sme future pint at the strike f the midnight hur (fur r five years later). This makes New Zealand s Investr 1 Categry in particular quite ppular. It is als the ne factr that is nt understd. 16. The Investr 2 Plicy is a pint system plicy (the Investr 1 plicy is nt) and the number f pints required will fluctuate. Hwever, currently selectins are made with prpsals invlving an investment f $2.5 millin (see details belw). The categry is age restricted at 65, English at IELTS 3.0 r equivalent r abve is required fr the principal applicant and funds fr investment must be surced, thugh nt at the level f an audit. 17. In May 2017, an enhancement was made t the presence requirement settings. Fr Investr 1, the investment f $10 millin required a trip t New Zealand t uplift the visas within 12 mnths f the grant f visa and a presence requirement f 44 days (principal applicant nly) in years tw and three f the investment perid i.e. a ttal f 88 days but in tw separate years. Prvided that 25% f the investment is in nn-bnds (see belw) the 88 days can nw be spent at any perid f time during the three year investment perid, thus giving flexibility, althugh the applicants may still be required, in rder t fulfil banking requirements, t travel t New Zealand prir t the investment prcess being finalised. In sme circumstances, it may be pssible nw fr

7 6 Investr 1 clients t spend their 88 days in New Zealand n ne trip. The family must enter the cuntry t uplift their visas, but the ttal day requirement applies nly t the principal applicant. 18. The presence requirements in the Investr 2 Categry prbably make the categry nncmpetitive hwever. Fr thse wh genuinely wish t take up residence in New Zealand, and have sufficient funds t invest, this is hwever a far better ptin than the abve described Entrepreneur Wrk-t-Residence prgram. The presence requirement is 146 days in years tw, three and fur althugh this becmes mvable i.e. a ttal f 430 days t anywhere within the investment perid as lng as the investment invlves 25% r mre in grwth investments (i.e. nn-bnds, nn-philanthrpic investments). Again the whle family must fly in during the first 12 mnths t uplift the visas, but thereafter the presence requirement lies with the principal applicant. Business experience is a prerequisite. 19. When discussing the pints belw, please nte that a reductin frm $3 millin t $2.5 millin is als available where the applicant agrees t an investment f at least $1.5m in grwth investments (nn-bnds, nn-philanthrpic). 20. The pints system is briefly as fllws: i. English language ability, principal applicant 3.0 IELTS 1 pint 4.0 IELSTS 4 pints 5.0 IELSTS 10 pints 6.0 IELSTS 13 pints 7.0 IELSTS 17 pints 8.0 IELSTS 20 pints ii. Investment funds $3 millin 10 pints $3.25 millin 15 pints $3.5 millin 20 pints $3.75 millin 25 pints $4 millin 30 pints etc

8 7 iii. Age pints pints pints pints Less than pints iv. Recgnised business experience 3 years 9 pints 4 years 12 pints 5 years 15 pints pints 21. Business experience requires either wnership r management f a business that has at least five fulltime emplyees r an annual turnver f NZ $1millin r mre. 22. English language testing can be thrugh ther methds ther than IELTS and the abve is a brief verview nly i.e. TOEFL ibt scre = IELTS It is imprtant when setting a prpsed applicatin, which is first dne by way f an Expressin f Interest (withut any evidence accmpanying the applicatin) t check the current pl draws. On 2 Nvember 2017, the selectins were fr thse with an Expressin f Interest at 33 pints r abve. On 19 Octber 2017 nly thse with 76 pints r abve were selected. On 5 Octber 2017, the selectin included an applicatin at 30 pints. The draw ccurs every 2 weeks. The abve suggests that currently applicants with a lw scre will be able t succeed at the lwer settings i.e. with either $3 millin r reduced t $2.5 millin with an investment f $1.5m in nnbnds, nn-philanthrpic. As the plicy settings are new hwever, a rise is predicted. Clients shuld cnsider filing with 70 r mre pints t be n the safe side. The recent draws must be checked, befre filing an Expressin f Interest, if the client is interested in the utcme.

9 8 Apprved investment 24. It is imprtant t realise that funds must reach New Zealand thrugh the banking system. It is surprising hw many cases g n an appeal cncerning this pint. In particular, funds cannt cme in t New Zealand in a manner that avids central bank regulatins in the hme cuntry (especially the Peple s Republic f China). 25. Annexed t this Paper is the full set f apprved investment pssibilities set ut in the Immigratin rules at BJ The investment cannt include a residential prperty used by the investr (in fact any investrs purchasing a residence fr persnal use shuld first btain tax advice and in particular specialist advice cncerning duble tax agreements), as the maintenance f a hme will make the persn subject t tax n a wrldwide basis. 27. Nte hwever BJ (vi) residential prperty develpment prperty(s). It is imprtant t btain specialist immigratin and legal advice when planning fr an applicatin invlving particular investments. 28. The intrductin f an ptin invlving philanthrpic investment and angel funds r netwrk investments is new. Special cnditins will apply, but nte that like bnds, a philanthrpic investment will nt cunt twards the ttal required fr the grwth investment requirement if the reductin frm $3 millin t $2.5 millin is sught, r where flexibility cncerning the presence requirements is needed (in either Investr 1 r 2). A wrd f warning: there is n flexibility t presence r investment deadline dates. If deadlines are nt met, yu start all ver again.

10 9 Summary 29. In shrt, New Zealand s Entrepreneur Wrk/Residence Visa is nly suitable fr thse wh have past business experience and wh are willing t spend at least 80% f each year in New Zealand running a business as a set-up r where their investment expands an existing business. 30. The Investr 2 Categry has an nerus presence requirement whereas the setting under the Investr 1 Categry requiring nly 88 days during the investment perid is cmpetitive, particularly given that the prject itself, nce the investment is cmpleted, results in residence withut any future presence requirement at all. This cmpares favurably against ther jurisdictins. 31. In essence, investr residence gives an indefinite status, which can then be activated thrughut the grantee s lifetime, even int their dtage when they will nt meet health requirements. It is a lng-term investment fr a right t reside in ne f the mst beautiful cuntries in the wrld. Essentially it is a halfway huse smewhere between residence and citizenship. David Ryken Ryken and Assciates david@rykenlaw.c.nz

11 10 BB3.10 Pints scale fr an Entrepreneur Wrk Visa a. Applicatins must meet a minimum scre f 120 pints in rder t be granted an Entrepreneur Wrk Visa. Applicatins nt meeting the minimum scre f 120 pints will be declined. b. Applicants must be able t demnstrate t the satisfactin f a business immigratin specialist why they shuld be awarded the pints they have claimed. c. Business immigratin specialists must give written reasns fr declining the applicatin and nt awarding any pints claimed. d. The fllwing table utlines the pints that can be awarded fr an Entrepreneur Wrk Visa applicatin: Pints fr business experience (can be awarded in nly ne categry) Relevant self-emplyment 10 years years years + 20 Other self-emplyment 10 years years years + 5 Relevant senir management experience 10 years years + 5 Pints fr benefit t New Zealand (can be awarded in up t tw categries) New full time emplyment creatin 10+ new full time psitins fr New Zealand citizens r residents 80 5 r mre new full time psitins fr New Zealand citizens r residents 50 3 r mre new full time psitins fr New Zealand citizens r residents 30 2 new full time psitins fr New Zealand citizens r residents 20 1 new full time psitin fr a New Zealand citizen r resident. 10

12 11 Pints fr apprved exprt businesses (based n annual turnver) $1,000,000 + turnver a year 80 $750,000 + turnver a year 60 $500,000 + turnver a year 40 $400,000 + turnver a year 30 $300,000 + turnver a year 20 $200,000 + turnver a year 10 Pints fr unique r new prducts r services t New Zealand A credible business prpsal that prvides unique r new prducts/ services t New Zealand, r t a particular regin. 30 Pints fr capital investment $1,000, $750, $500, $400, $300, $200, under $200,000 0 Pints fr age f prspective applicant (at date f ldging applicatin) 24 and under and ver 0 Bnus pints Business based utside Auckland as defined in BB Nte: Fr definitins f terms fr the purpses f the Entrepreneur Wrk Visa and Entrepreneur Residence Visa Categries, see the Definitins sectin at BB6. The criteria fr recgnising capital investment is utlined at BB Effective 07/12/2015

13 12 BJ Definitin f 'acceptable investment' a. An acceptable investment means an investment that: i. is capable f a cmmercial return under nrmal circumstances; and ii. is nt fr the persnal use f the applicant(s) (see BJ ); and iii. is invested in New Zealand in New Zealand currency; and iv. is invested in lawful enterprises r managed funds (see BJ ) that cmply with all relevant laws in frce in New Zealand; and v. has the ptential t cntribute t New Zealand's ecnmy; and vi. is invested in either ne r mre f the fllwing: bnds issued by the New Zealand gvernment r lcal authrities; r bnds issued by New Zealand firms traded n the New Zealand Debt Securities Market (NZDX); r bnds issued by New Zealand firms with at least a BBB- r equivalent rating frm internatinally recgnised credit rating agencies (fr example, Standard and Pr's); r equity in New Zealand firms (public r private including managed funds and venture capital funds); r bnds issued by New Zealand registered banks; r equities in New Zealand registered banks; r residential prperty develpment(s) (see BJ ); r cmmercial prperty (see BJ3.15.5); r bnds in finance cmpanies (see BJ3.10 (d)); r eligible New Zealand venture capital funds (see BJ ); r philanthrpic investment (see BJ ); r Angel funds r netwrks investments. Nte: New Zealand registered banks are defined by the New Zealand Reserve Bank Act 1989.

14 13 b. Fr private equity investments t be acceptable, the business immigratin specialist must be satisfied that the funds being invested are t be actively used by the cmpany t, fr example, fund cmpany grwth, pay dwn cmpany debt r purchase capital items. c. Ntwithstanding (a) abve, where an investment fails t meet ne f the acceptable investment requirements, a business immigratin specialist may cnsider, n a case by case basis, whether the failure was beynd the cntrl f the principal applicant and if satisfied that this was the case, may cnsider the investment acceptable. d. A Business Immigratin Specialist may cnsider bnds in finance cmpanies as an acceptable investment where the finance cmpany: i. is a whlly-wned subsidiary f, ii. raises capital slely fr, and iii. has all its debt securities uncnditinally guaranteed by a New Zealand Stck Exchange listed cmpany r a lcal authrity. Nte: The value f an investment is based n the net purchase price (fr example, less any accrued interest, cmmissin, brkerage and/r trade levy), nt n the face value f the investment.