NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
of the term. The Fair Trading Act 1986 also provides examples of potentially unfair terms, such as clauses
• has a range of import tariffs, taxes and charges that may apply depending on the relevant business area. 9.2 Withholding Tax New Zealand imposes withholding taxes on interest, dividends and royalties paid by New Zealand resi - dents to non-residents. Franchise fees, royalties and technical service fees may be subject to such with - holding taxes if the payments fall within the definitions of interest, royalties or dividends, as defined under New Zealand tax legislation. While New Zealand does not have a specific withholding tax for management fees or technical service fees, the definition of “royal - ties” under domestic legislation is broad and includes payments for know-how. Accordingly, the withholding tax on royalties may capture certain types of techni - cal service fees, depending on the exact nature of the activity being compensated. Royalty withholding tax generally applies at 15% to the gross payment under domestic legislation, which may be reduced to 10% or 5% under an applicable double tax treaty. Where New Zealand-sourced fees for services that are not characterised as dividends, royalties or interest for New Zealand tax purposes are paid to a non-resident franchisor, such fees may be relieved from New Zea - land taxation under an applicable double tax treaty under the standard “business profits” article, unless that item of income is attributable to a permanent establishment of the non-resident franchisor in New Zealand, or unless that item of income is otherwise dealt with in another article of the relevant treaty. New Zealand also imposes interim withholding taxes on certain contract payments made to non-residents that perform services physically in New Zealand, although exemptions may be obtained from the New Zealand tax authority if the non-resident establishes that its contract activity is treaty-protected (eg, not attributable to a permanent establishment in New Zealand under an applicable double tax treaty) or falls within certain prescribed limits under domestic tax legislation.
that allow only one party to: • vary the contract unilaterally; • avoid or limit performance; • terminate the agreement; and • impose penalties.
Certain terms are exempt from being declared unfair, including those that define the main subject matter of the contract or set the upfront price payable. 8. Dispute Resolution 8.1 Enforcement of Foreign Judgments New Zealand is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”); thus, arbi - tral awards can be enforced through the Convention protocols. 9. Payment and Taxes 9.1 Restrictions or Limits on Franchisee Fees and Royalties There are no restrictions specific to the franchise sec - tor. Franchisors should be aware that New Zealand: • implements United Nations Security Council sanctions – violations can result in severe penal - ties, including fines and imprisonment as well as commercial and reputational damage (New Zea - land banks are generally risk-averse in relation to sanctions); • has the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, which imposes obligations on certain entities (including financial institutions, lawyers, accountants and real estate agents) to have in place procedures and processes to detect, deter, manage and mitigate money-laun - dering and the financing of terrorism; and
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