NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
Non-Resident Withholding Tax (NRWT) Subject to certain exceptions, New Zealand-sourced interest paid to non-resident private credit providers will generally be subject to NRWT at the rate of 15%. This rate of tax may be reduced to 10% (or similar concessionary rates) in cases where the payee is resident in a country with which New Zealand has a double tax agreement. A payer may elect to reduce the rate of NRWT to 0% and instead register for and pay an approved issuer levy (AIL) at a rate of 2% of the gross amount of inter - est. The AIL regime is not available where interest is derived jointly by a resident and a non-resident or paid between associated persons (unless the approved issuer is a member of a New Zealand banking group), or in instances of “related-party debt”. Most offshore-based private credit funds require New Zealand borrowers to register for, and pay, AIL with no ability for the borrower to deduct the cost of the AIL from interest payments – but this is a deal-by-deal negotiation point. 4.2 Other Taxes, Duties, Charges or Tax Considerations New Zealand has a goods and services tax (GST), but GST is not charged on the supply of “financial services” (including provision of credit). There are no stamp taxes or other similar duties, charges or tax considerations that apply in New Zealand. 4.3 Tax Concerns for Foreign Lenders See 4.1 Witholding Tax . 5. Guarantees and Security 5.1 Assets and Forms of Security Private credit transactions will almost always be secured. A typical security package will involve a cross-guaran - tee and all-asset security being granted by each entity in the borrowing group, together with registered mort - gages over any real property. This is often subject to a guarantor coverage test, such that members of the borrowing group owning/contributing between 80%
and 95% of the group’s assets/EBITDA must grant all-asset security and become guarantors. For acquisition finance transactions, New Zealand tar - get entities will usually accede to the security package within a week post-closing. Real Property Security over interests in land (real estate) is generally taken by a registered mortgage. Although an all-asset security agreement will create a security interest over both personal property and real property, registered mortgages will also be taken where land is a material part of the credit package. Registration is not manda - tory, but an unregistered mortgage will generally rank behind registered mortgages and other instruments registered on the title. Registration is a straightforward and largely online process facilitated through LINZ (a government department). Registration costs approx. The Personal Property Securities Act 1999 (PPSA) governs security over personal property (being, in general terms, all property other than real property). Security over personal property can be taken by either an all-asset security deed or a specific security deed over certain personal property assets (such as shares). Security interests usually operate in relation to both current and future assets, as well as any proceeds of the collateral. The relevant security deed will contain certain required statements to ensure the security “attaches” to the relevant personal property and for such security to be enforceable against third parties. There is no particular form of security agreement that must be used, but it will usually be in the form of a deed. NZD90–NZD180. Personal Property Security over personal property will be “perfected” once either the secured party has taken possession of the collateral or a financing statement has been reg - istered on the Personal Property Securities Register (PPSR). It is customary for each security interest to be perfected by registering a financing statement on the PPSR. However, a secured party will also take pos - session of certain types of collateral, such as shares,
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