Changes to the Investor categories – effective 22 May 2017

As announced earlier this year, the government has recently made changes to the Investor categories, effective from 22 May 2017. Most of the changes affect the Investor 2 category, however both categories are now incentivised to encourage applicants to make more growth-oriented investments. Additionally, the annual cap for the Investor 2 category has been increased from 300 to 400 places. Note that the Investor Plus category will continue to not be subject to an annual cap.

A summary of the changes is outlined below.

Investor Plus category

Previous requirements

Under this category, applicants are required to invest a minimum of NZD10 million for a period of three years. In exchange for the substantial investment required, applicants must meet minimum requirements including health, character and funds ownership (including source of funds) criteria.

Successful applicants must also spend a minimum of 44 days in New Zealand in each of years two and three of their investment period, as a condition of their resident visa.

New requirements

By incentivising the type of investment(s) made by the applicant, INZ will now allow some flexibility in how the time in New Zealand is spent. If the visa applicant invests a minimum of 25% of the requirement investment (ie NZD2.5m) in growth-oriented asset classes (see below for definition), the visa holder will only be required to spend their 88 days in total in New Zealand at any stage during their three year investment period.

Investor 2 category

Previous requirements

Applicants under this category were previously required to invest a minimum of NZD1.5 million for a period of four years, in addition to providing evidence of a further net NZD1 million in net assets for the purposes of settlement funds. Whilst there was no requirement for the settlement funds to be transferred to New Zealand, it did mean that in effect applicants needed to evidence at least NZD2.5 million as a starting point for this type of application.

Furthermore, points were awarded for additional investment, age, business experience and English language. Successful applicants were then required to spend a minimum of 146 days physically present in New Zealand in each of years two, three and four of their investment period.

New requirements

The main changes to the Investor 2 category relate to the award of points, and to the investment required.

The minimum investment now required under this category will be NZD3 million for a period of four years. However, the requirement for settlement funds has now been removed.

Additional points are now available for those with

  • more than ten years’ experience (previously the maximum experience that could be claimed), up to a total of 15+ years’ experience
  • English language skills that are either native or higher than an IELTS 5.0 test score (previously the maximum that could be claimed), up to an 8+ IELTS test score (or for native speakers). Furthermore, additional tests can be used to demonstrate English language such as TOEFL, PTE and OET
  • At least 25% of their acceptable investment placed into growth-oriented asset classes (see below for definition)

There are several incentives for those who commit to investing at least 25% of their acceptable investment in ‘growth investments’:

  • Qualify for 20 bonus points
  • May spend their minimum time in New Zealand during their four year investment period at times convenient to them – ie a total of 438 days physically present in New Zealand over the entire four year investment period
  • Gain access to priority processing of their application

For those who commit to at least 50% of their acceptable investment in ‘growth investments’, a further incentive of NZD500,000 reduction in the minimum investment amount is offered.

Note that it will be necessary to demonstrate ownership and source of funds for the entire investment amount as part of the application, however only the discounted value needs to be transferred to New Zealand if qualifying for the reduction.

Changes for both categories and definitions

Acceptable Investment

There have been some additions to the list of acceptable investments for the purposes of these investor applications:

  • Commercial property;
  • Philanthropic investment (may be up to a maximum of 15% of the acceptable investment required)
  • ‘angel funds or networks’ investments

Further clarification has been provided also, regarding private equity investments. To qualify as acceptable, the funds being invested into businesses must be actively used by the company for such things as funding growth, reducing debt or purchasing capital items. Investment into a company alone is not sufficient and will be deemed unacceptable.

Both commercial property and philanthropic investments have been further defined as follows:

Commercial Property

  • Is not residential or for domestic use, and is not to be used by the family, relatives or anyone associated with the principal applicant during the investment period
  • Is to be used for business purposes, ie it is capable of a commercial return and is not being used for land banking
  • The purpose for such investment is to make a commercial return on the open market
  • Empty land or new developments may be permitted, providing plans for development have been submitted to the relevant regulatory authorities and/or work has begun on the development

Philanthropic Investment

  • Be a genuine investment
  • A registered charity with at least two years’ annual returns and IRD donee status, or a not-for-profit organisation that provides social, cultural or economic benefits approved by INZ
  • Factors that may be considered in determining acceptability include how long the entity has been operating, the constitutional arrangement of the entity and the entity’s track record.

Growth Investment

These are broadly defined as investments that exclude bonds and philanthropic investments. Note that convertible notes are classed as bonds for the purposes of this definition. Please don’t hesitate to contact me if you have any questions or wish to discuss further.

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