Following the protocols formalized by the Financial Service Providers (Registration and Dispute Resolution) Act of 2008, New Zealand legislation enables the registration of NZ companies as Financial Service Providers (FSP).
A New Zealand FSP, also known as a New Zealand Offshore Finance Company, however, this usually refers to an unregistered NZ Company, one that has not registered as an FSP.
UPDATE: We have stopped recommending NZ Financial Services Company due to the onerous process and recent changes to NZ law that have created significant obstacles in establishing an NZ FSP. In an effort to clean up its offshore finance industry the government has created a registration process that is costly, time-consuming with high local requirements that deter most all of our clients away.
NZ has made a requirement that all FSPs must have a local NZ Director. Unfortunately, the person must be more than a nominee director but a full trusted business partner. While this fine for Australian or New Zealander residents, for everyone else a NZ Financial Company is not recommended.
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Activities of an FSP can include, but are not limited to the following services:
Other activities that require additional licencing and paid-in capital requirements include any financial services that has to do with securities, derivatives, commodities and futures contracts.
Although the FSP is not subject to Central Bank supervision and regulation, its activities are regulated by several acts including:
The requirements of these regulations are not onerous and, in most cases, have little or no impact. In fact, these requirements should provide potential clients of a properly run FSP with a high degree of comfort. At the same time, the FSP can provide a high level of confidentiality, because the Reserve Bank does not act in any overseeing capacity.
Please however note the New Zealand FMA has full jurisdictional control over the FSP both in the initial review of the application as well after approval.
As part of our package, we can provide the necessary registration so there will be no non-resident withholding tax deducted at the source, but instead a minimal 2% levy. This is the 'Approved Issuer Levy' structure where the FSP is registered as an Approved Issuer.
A NZ FSP is subject to taxation on its worldwide income at standard NZ corporate rates which are quite high, unless it obtains a LTC election from the NZ IRD which requires foreign persons as shareholders rather than a corporation or a NZ Trust with a resident trustee.
However, the tax can be largely eliminated by using an offshore investment company and/or a licensed Panama corporate structure to handle payment processing on behalf of the FSP. Taxable income can be shifted to these offshore vehicles through this outsourcing method.
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Disclaimer: Offshore Protection strives to keep information on this website updated, however, laws and circumstances are subject to change. All information on this website is for reference purposes only and does not constitute legal or tax advice. Contact an Offshore Protection representative for specific advice regarding your situation.
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