Marcus Beveridge, Managing Director, and Andrew Nah, Law Clerk, of Queen City Law share their insights on Active Investor Plus. 
The Active Investor Plus (AIP) visa policy replaced our previous investor-related framework in October 2022. Unfortunately, it has been struggling to live up to its predecessor and seems unlikely to match its success.
A key factor of this is that the AIP policy introduces another layer of bureaucracy that obfuscates what investors need to do to gain residency in New Zealand. The old framework had more freedom and flexibility in terms of what investors could invest in. It was a more practical policy that made it easier for investors to bring their millions of dollars and foreign capital into the country to benefit us. The new AIP framework on the other hand requires approval from New Zealand Trade and Enterprise (NZTE).
NZTE has unfortunately been slow to mobilise to date and has had some teething issues of late, including being accused of being an alpha male boys club and its Minister (Nash) having been booted out of Cabinet (since publication of this article, Nash has in fact resigned from politics. The new Minister is now Hon. Damien O’ Connor). The AIP category technically launched in September 2022 but no applications could actually be launched due to unavailable investment opportunities. Part of this was due to NZTE’s delays in appointing an independent advisory panel. As NZTE will be deciding what investments are suitable under the AIP, on 25 January 2023, they finally appointed an advisory panel consisting of only 3 business “experts” who will determine each application. Their bios can be read here. The advisory panel only meets monthly to assess applications, which means there will be some unnecessary lost time depending on when you submit your application where you’re simply waiting for NZTE to look at your application. And indeed, after AIP launched in September 2022 the first advisory panel meeting was in February 2023, where they received a grand total of 3 applications.
Let’s look at the old Investor framework before it was replaced. In the year September 2021 to September 2022, New Zealand received some $5 billion in investment funds. Compared to the usual $3 billion a year the old framework earns, it can be seen that the previous categories were becoming increasingly popular. It is now May, 8 months after the launch of the policy. Some 18 applications have been lodged with INZ during this period. If we adopt say $7.5 million as the average investment amount (rather crude methodology we accept), the current 18 applications lodged under the AIP, if they are all approved, will likely bring a total of $135 million in investment funds, which again in rough terms suggests a significant reduction of investment funds. If we extrapolate this out and say that AIP will generate another $100 million in another 4 months, then AIP will have made New Zealand 4.7% of the investment funds it got under the old framework ($235 million divided by $5,000 million = 4.7%) Or to put it another way, New Zealand would have lost 95.3% of the income it would have gotten under the old framework.
But why is the AIP framework so unpopular? Perhaps some of it can be attributed to it being a new framework and investors are acting cautiously. But a significant factor is that the new AIP framework is considerably more difficult to apply for. For reference, the old investor framework had the Investor 1 and Investor 2 visa categories. You needed to bring either $10 million or $3 million into the country respectively. The AIP framework requires that investors bring $15 million (weighted value) into the country, an eye-watering high number and at least half of the investment funds must be injected in what many would consider to be High-Risk investments. Granted, there are ways to bring this number down but on the face of it, this simply makes New Zealand seem untenable and unattractive to foreign investors.
Many are saying New Zealand is taking the Mickey and does not genuinely want business migrants anymore. If one stops and considers what an appalling disgrace the Entrepreneur Work Visa is, it is indeed reasonable to find that this Government has little interest in business migration. When one considers former Minister Nash and Six60, on the rooftops of New York, expousing New Zealand as the best destination for business migrants and at considerable taxpayer’s expense, one must scratch one’s head. It would appear that lunatics are running the asylum. In reality, our business migration framework is not as attractive as our competitors. Australia for example only asks for $5 million and Canada had asked for $1.2 million, in low-risk investments and their requirements can be seen as less stringent than ours. In Canada, previously business migrants could somewhat perversely borrow such investment funds.
The Government maintains that New Zealand is a popular destination internationally and that investors will be willing to pay this high price for residency. However, New Zealand is still struggling to get normal temporary visa numbers back to previous levels and many businesses are suffering from a lack of customers and workers. It raises the question if New Zealand is truly as attractive as believed, to the point where it seems almost arrogant to assume investors will flock to us despite residency having a cost that’s three times higher than Australia’s. In fact, the reality is that sophisticated investors from jurisdictions like Singapore currently think Aotearoa is a basket case and are giving us a wide berth. Furthermore, despite the target jurisdiction being North America, of the actual 12 applications received by INZ only ONE has been from the USA. Too little too late is a great way of saying the results to date have been underwhelming.
Theoretically, it is possible to lower the amount you need to invest under AIP and that would make us comparable to Australia. You would need to make a $5 million direct investment into one of the approved investments listed by NZTE. This causes some unfortunate implications. The problem is that NZTE’s normal job is to attract foreign investment and grow the penetration of our export workers. But they’re also the ones deciding what investments are acceptable under AIP. There is a real risk that NZTE will focus on driving investors to their own high-risk investments and exclude other viable but safer investment projects. Even if NZTE can maintain a perfect separation of interests to avoid conflict, investors may still see the potential for conflict and become reluctant to apply. In addition, the NZTE Live Deals platform has not been revamped to fit their new role as arbitrators for AIP applications. The Live Deals platform allows investors to connect directly to investment opportunities in New Zealand, but it is based on assumptions that only apply under NZTE’s previous roles. This makes it awkward to use for an investor’s AIP application because they cannot, for example, get assistance from their legal counsel as they cannot access the platform at all. NZTE advises that this is going to be fixed shortly. In addition, anything with any connection to property will be declined on the spot. There is a whole array of consultants hoping to exploit this proposed investment tsunami but so far there would be very little return for New Zealand tax payers and there is a small trickle of investment rather than a wave of any proportion.
On top of all of this is a complicated web of practical issues that makes applying under AIP frustrating and confusing. It is no secret that Immigration New Zealand (INZ) has been slow with processing applications for years. This encourages clients to hedge their bets and make applications with competing countries to see which one will be the fastest, and we are sad to learn that some very switched on NZ advisors are suggesting other investment jurisdictions. New Zealand is typically slower than the rest of our competitors, who can complete an entire application before a single INZ officer even looks at it due to the massive backlog and queues they’re currently plagued with and the constant churn of staff – there are about 500 applications in the pre-existing queue and for some unfathomable reason it is understood that these residual investor applications are now getting largely declined even though there has been no change in those rules. To be fair however, it is understood that any new applications under the new AIP program will apparently be dealt with expeditiously as there is no queue. In addition, the Foreign Investment Fund (FIF) rules are grossly complex and, if triggered, will drag the entire application down to a standstill. New Zealand is the only country that uses FIF and that makes us extremely unattractive to foreign investors. It is too much of a hurdle and a hassle to even bother, when you could get similar or even better results by applying next door in Australia. And of course, infamously, New Zealand has strict rules about foreigners owning residential property that, if properly understood and fully disclosed, would turn off potential business migrants. Dealing with the Overseas Investment Office will require specialist input, the result will be uncertain, and the net impact is that it further blunts our competitive edge.
Asking people to invest $15,000,000 in little old New Zealand but not allowing someone to buy a residential home here is plainly delusional. To date we have not mentioned the direct investment requirements. If one invests NZD $5,000,000.00 in a NZ business trading as a going concern, one can qualify under those rules. The company must be approved by NZTE. But such direct investment is not for the faint-hearted and typically would require due diligence, funding analysis, and reviewing of Employment Agreements and key staff amongst other matters. We submit the government should NOT be involved in such endeavors and the market should be self-regulating. It is inevitable that someone will end up suing the government when some JV fails.
The perception of AIP isn’t that it is an upgrade or a rebalancing of the investor framework to perfect the system but rather a political move. It is no secret that the current Government has made wide-sweeping changes to the immigration framework designed to make it harder for migrants to enter New Zealand and is critical of investors “buying” residency – including the unpopular and controversial change to the English language requirement and making it harder for non-English speakers to migrate here. This bizarre line of thinking has led to a half-formed and ill-planned investor framework that isn’t actually designed to encourage investment into New Zealand. Rather, it feels almost maliciously designed to try and squeeze as much out of investors as punishment in the hopes that New Zealand may deign to grant residency if the mood strikes it. This hostile policy is unlikely to ever meet the success of the previous framework as it is not designed to be successful. It’s designed to withdraw New Zealand from the international market in the misguided view that we are so desirable that foreigners will crawl over thorns and brambles for a chance to enter. We wanted to have our cake and eat it too by doing nothing to encourage top-quality migrants or investors to come to New Zealand but expect them to flock to us regardless. This is reflected in other areas of the immigration framework, like how so few migrant doctors and nurses have actually gained residency in New Zealand in recent years. Why bother with New Zealand when Australia is much easier to get into and you’d be paid more?
The AIP is designed to only be achievable by the extremely wealthy or the extreme risk-takers. Unfortunately, these aren’t ideal targets to pursue. If you truly are that fabulously wealthy then there is a very good chance that you will have business assets and investments that are too difficult to move to New Zealand and too valuable to give up. You could potentially run afoul of the FIF or even the controlled foreign company (CFC) rules. This full engine rebore will, we believe, not cut the mustard and despite some positive comments from its promoters we would be surprised if many people subscribed to this framework. Cabinet demonstrably ignored private sector advice about these investor changes. At the same time, the Government awarded some 200,000 low and mid-skilled workers residence visa. All at a time when the NZ economy is on its knees. The irony being we could have tweaked the previous investment immigration framework and for example funded a second Harbour crossing or some other public works program or infrastructure bond. What a waste. No doubt the framework will change again in due course.
Marcus Beveridge is the Managing Director of Queen City Law. His main areas of practice are construction and property law, commercial law, foreign investment, real estate services and immigration. Marcus brings something special to his legal practice. Connect with Marcus via LinkedIn
Andrew Nah was admitted to the New Zealand High Court as a Barrister and Solicitor in 2018 and currently supports the immigration law team, assisting with visas and general immigration matters. Connect with Andrew via LinkedIn
