23 May 2017
Positive Changes to the New Zealand Migrant Investment Categories

Immigration New Zealand (INZ) has implemented changes to both the Investor Plus and Investor 2 Resident Visa categories.

The changes have unintentionally shifted the policies to slightly favour applicants from Western jurisdictions and have built in flexibility to satisfy the physical presence requirement in both categories for those who invest in “growth orientated” investments which are essentially anything but bonds.

Lane Neave Immigration Partner, Mark Williams, said the changes are largely positive and in terms of the Investor Plus Category will make New Zealand a more attractive destination for investors.

“We reviewed a raft of these signaled changes in December last year and it’s pleasing to see them being implemented, as well as see some more positive changes being introduced,” said Williams.

“In the international context, both in terms of international push factors and visa product comparison with some of our competitors, New Zealand is in good shape, especially when compared to Australia.”

“Providing the opportunity for a mixed investment portfolio that includes growth orientated investments to secure physical presence flexibility is smart incentive to produce greater benefit from these investments for New Zealand.”

The main points of the new policy are:

Investor 1 (Plus) Category
1. 25% Investment in “growth orientated” investments allows the physical presence requirement of 88 days to be spread over the entire three year investment term, rather than fixed at 44 days in each year of the last two years of the investment – this flexibility is a significant improvement, and enhances what is already an excellent visa product. Applicants are now not going to “waste” time spent in New Zealand for year one, and ironically, year one for most active investors is typically presence heavy as they come in to work on establishing and acquiring investments. Most Investor Plus applicants will find this flexibility attractive, so we believe it is highly likely that investors who would typically only invest in bonds, will now establish mixed bond/equity portfolios at this ratio at the very least.

Investor 2 Category
1. Minimum investment amount increased to NZ$3.0m, and removal of Settlement Fund requirement – simple and targeting higher value return (plenty of international demand for this visa product). Note NZ$2.5m is the actual number they are targeting as default (refer below). In practice this is what was required under the old policy, so they are not (effectively) reducing the number of people who can qualify under the new regime in any material way.
2. Increase in cap from 300 applications per year to 400 – this creates stability and certainty because NZ$3.0m (NZ$2.5m) is not an unreasonable lift. Therefore, we don’t believe that applicants will need to invest too much more to secure an invitation unless they score poorly. Those with limited funds, limited English, less business experience, and not wishing to pursue “growth orientated” investments are the main ones at risk of not being invited to apply, who may well have snuck in under the old policy.
3. 25% Investment in “growth orientated” investments allows the physical presence requirement of 438 days to be spread over the entire four year investment term, rather than fixed at 146 days in each year of the last three years of the investment – this will be popular, and is practical as it will not be difficult to establish a mixed bond/equity portfolio at this ratio to secure that “credit” for year one physical presence.
4. 50% investment in “growth orientated” investments allows the applicant to reduce their investment from NZ$3.0m to NZ$2.5m (NZ$1.5m growth orientated and NZ$1.0m non growth orientated) – this is the desired number for INZ. They want NZ$2.5m and a large part of that out of bonds. This has the potential to be the “go to” investment structure, but opens up risk for financial loss, particularly those who are investing in equities for a relatively short period of time (less than five to seven years). QDII Chinese investors (who present less value to New Zealand) are exposing themselves to risk of financial loss here, because of the requirement to return their investment capital to China shortly after the investment period concludes is a relatively short equity investment timeframe (equities need to be held longer term to smooth out market falls during the investment term).
5. A softer “business experience” definition – this is a significant improvement and a welcome change. It is now much easier to assess and apply in practice.

In addition to these specific changes per policy, for both categories the definition of “acceptable investment” around commercial property, private equity, philanthropic and angel investments has been revised and is now much easier to apply.

What have they got wrong?
The policy is 95% there, although the “ownership” of funds definition does still have limitations in practice, especially for more complicated financial investments/corporate structuring where standard tax layering (from an international investment perspective) is not permitted in a traditional sense. This is our only disappointment with the changes. There was an opportunity to look hard at this and align standard legal structuring around visa based investments (moving from “ownership” to effective “control”), instead of having to implement non-typical ownership structuring in a shareholding sense to meet the personal “ownership” definition.

ends

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