NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
10. Payment and Taxes 10.1 Restrictions or Limits on Franchisee Fees and Royalties There are no restrictions specific to the franchise sec - tor. Nonetheless, 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 • has a range of import tariffs, taxes and charges which may apply depending on the relevant busi - ness area. 10.2 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.
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. 9. Dispute Resolution 9.1 Enforcement of Foreign Judgments Enforcement of foreign court judgments in New Zea - land depends on whether a reciprocal enforcement regime applies to the jurisdiction in question. Judg - ments from a limited number of specified countries and courts (largely Commonwealth jurisdictions) can be registered and enforced under the Reciprocal Enforcement of Judgments Act 1934, and judgments from Australian courts and tribunals can be enforced under the simplified regime in the Trans-Tasman Pro - ceedings Act 2010. The Senior Courts Act 2016 pro - vides for the enforcement of judgments for the pay - ment of money from any court of a Commonwealth country, but only if the judgment is not enforceable by the Reciprocal Enforcement of Judgments Act 1934. Alternatively, if the judgment is not captured by one of these regimes, a foreign judgment may be enforced under the common law. However, while enforcement under the common law may be more efficient than relitigating the substantive dispute, it still likely to involve greater cost and risk than where a reciprocal regime applies. Foreign arbitral awards are, generally, straightfor - ward to enforce in New Zealand. The recognition and enforcement of foreign arbitral awards is governed by Articles 35 and 36 of Schedule 1 to the Arbitra - tion Act 1996, which effectively incorporate the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). As a result, a party seeking to enforce an award in New Zealand can generally expect a more predictable and consistent process than enforcing a foreign court judgment where no reciprocal enforcement arrange - ment exists. Irrespective of where it was made, an arbitral award must be recognised as binding and enforced as a judgment on application to the High Court (or District Court where the amount of money does not exceed the threshold for civil cases – ie, up to NZD350,000).
59 FRANCHISING 2026
C HAMBERS.COM
Powered by FlippingBook