Examining the Long Term Business Visa: Comments on the recent changes Marcus Beveridge, Principal, Queen City Law Bradley So, Lawyer, Queen City Law LexisNexis Pacific 1
OVERVIEW Topics • What’s Changed? - Background - Why change? • Trend - Approvals - Decline • Changes • Specific Business Plan • Capital • Benefit to NZ LexisNexis Pacific 2
WHAT’S CHANGED? Background • LTBV introduced in 1999 • Objective – cater for business people Why change? • Raise the quality of applications • Ensure the benefit to NZ LexisNexis Pacific 3
TREND - APPROVALS LTBV Approvals by industry type (previous 12 months) Tourism and Accomodation Art & design Automotive Building & Renovation 7.0% 1.2% 1.6% 6.3% Retail/Wholesale Cleaning & Maintenance 2.1% 3.1% Consultancy 2.6% Cultural Businesses and Services Education 1.6% 1.9% Food & Dining Entertainment & Leisure 15.0% 2.1% Export 4.9% Farming & Agriculture Wholesale 2.1% 3.5% Fashion & Clothing Transport & Logistics 2.6% Health & Beauty 1.6% Retail/Export 0.9% Healthcare 2.1% 0.9% Retail - Other IT & Technology Import/Export Services 19.5% 2.1% 10.6% Manufacturing 1.2% Other Professional Services Migrant Services 1.4% 1.9% LexisNexis Pacific 4
TREND - DECLINES LTBV Declines by industry type (previous 12 months) Tourism and Accomodation Building & Renovation Automotive Advertising & Marketing 5.3% Art & design 2.4% 1.4% 2.4% Cleaning & 0.5% Retail/Wholesale Maintenance Consultancy 2.9% 4.3% 2.4% Cultural Businesses and Services 1.0% Entertainment & Leisure 3.4% Export 2.9% Food & Dining Wholesale 15.4% Farming & Agriculture Transport & Logistics 1.0% 1.9% 0.5% Fashion & Clothing Retail/Export 3.8% 1.0% Health & Beauty 1.4% Retail - Other Healthcare IT & Technology Services 16.8% 1.0% 22.6% Other Professional Services 2.9% Migrant Services Manufacturing 1.9% 1.0% LexisNexis Pacific 5
CHANGES Commenced on 8 April 2013 • Specific Business Plan • Capital • Benefit to NZ LexisNexis Pacific 6
SPECIFIC BUSINESS BEFORE “ BC4.1 Definition of a business plan (29/11/2010) A business plan is a plan to establish a specific business in New Zealand, which contains information as set out in the business plan form, and is supported by appropriate documentation.” AFTER “ BC4.1 Definition of a business plan (8/04/13) A business plan is a plan to establish or purchase a specific business in New Zealand, which contains information as set out in the business plan form, and is supported by appropriate documentation.” CASE STUDY - PIZZA Type of Business Buy or set up a new Pizza business. Location Auckland NZD $100,000.00 – NZD $150,000.00 Investment Fund Settlement Fund NZD $100,000.00 (family of four) Benefit to NZ Creation of Employment LexisNexis Pacific 7
SPECIFIC BUSINESS PLAN FACTORS TO CONSIDER • TYPE OF BUSINESS • Existing Business • Documentation – BC4.5.1 • Benefit to NZ - Employment • Creating a New Business • CAPITAL REQUIREMENT • Existing Business • Share Acquisition • Asset Acquisition • LOCATION • Forecast • Market Research LexisNexis Pacific 8
SPECIFIC BUSINESS PLAN Practical Implications • Offshore applicants will need to come to NZ before a visa is granted • Interim visa of 9 months is purely to set up the business • Minimal variation of business plan opportunities • Decrease in buying existing businesses (time constraint) • Pro forma business plans will no longer apply • Applicants are better prepared for Residency LexisNexis Pacific 9
CAPITAL CAPITAL NEW DEFINITION BH3.5 Consistency with business proposal under the Long Term Business Category ii. the business that has been established required the same or a greater level of capital investment than a business proposal in respect of which the applicant was granted or issued a work visa under the Long Term Business Category; … c. For the purposes of BH3.5(b)(ii), account will only be taken of the amount of capital that has been actively invested in the business. No account will be taken of : i. working capital (see BH4.5.15); or ii. passive or speculative investments, such as reserve funds or term bank deposits ; or iii. expenditure on items for the personal use of the applicant(s), such as personal residence, cars or boats. BH4.5.15 Working capital For the purposes of Entrepreneur Category instructions, working capital is capital that is tied to assets used in the on-going maintenance or day-to-day running of a business. LexisNexis Pacific 10
CAPITAL CASE STUDY • Applicant’s proposed business is to establish a Restaurant for $500,000.00. $50,000.00 will be used as working capital for stock. • Does the applicant qualify under the Entrepreneur Plus category? • Question; Can stock qualify as a capital investment as opposed to a working capital? • Long Term Fashion • Maintain a minimum stock • Re-purchase stock to maintain Lowest inventory level Practical Implications • Business Plan has to separate the capital that will be used as working capital and capital that will be used to purchase assets, equipment, fit out and shares. • Definition of working capital does not take into account the different type of businesses that required substantial amount of working capital e.g exporting businesses. • Requires more capital refer to the graph below. LexisNexis Pacific 11
CAPITAL $0 - $24,999 $1,000,000 - $2,000,000+ $750,000-$999,999 4.1% $1,999,999 0.2% 1.4% 0.4% $25,000-$49,999 6.0% $400,000-$499,999 $500,000- 1.4% $749,999 $50,000-$74,999 6.0% $300,000-$399,999 11.0% 2.7% $250,000-$299,999 3.5% $75,000-$99,999 $200,000-$249,999 7.3% 20.0% $100,000-$149,999 21.5% $150,000-$199,999 14.5% LexisNexis Pacific 12
BENEFIT TO NZ CHANGES BH4.10 Criteria for a business benefiting New Zealand a. A business is considered to add significant benefit to New Zealand if it can demonstrate that it has promoted New Zealand's economic growth by for example: i. introducing new, or enhancing existing, technology, management or technical skills; or ii. introducing new, or enhancing existing, products or services; or iii. creating new, or significantly expanding existing, export markets; or iv. creating sustained and on-going full time employment for New Zealand citizens or residents; or v. the revitalisation of an existing New Zealand business that has led to significantly increased financial performance ; and b. The business is trading profitably on the date the application is lodged or a business immigration specialist is satisfied that it clearly has the potential to become profitable within the following 12 months. c. If the associated Long Term Business visa application was made before 30 November 2009 the 'creating employment' benefit can also include non-New Zealand citizens or residence class visa holders, with the exception of the principal applicant. Note: For the purposes of BH4.10(a)(i) and (ii): • “new” means new to New Zealand or the region of New Zealand in which the business would be located; and • “existing” means existing within New Zealand or the region of New Zealand in which the business is located. For the purposes of these instructions, the employment of non-New Zealand citizens or residents is not considered an acceptable example of a business benefiting New Zealand. LexisNexis Pacific 13
BENEFIT TO NZ Practical Implications • Significant is intended to ensure that the proposed business maximizes the benefit to NZ • Holistic approach • Creation of employment has a higher threshold • Revitalization of business requires significant increase in financial performance LexisNexis Pacific 14
CONCLUSION REMEMBER – BEFORE SUBMITTING AN APPLICATION • “SPECIFICALITY” - IS IT SPECIFIC ENOUGH? • Existing or New • Benefit to NZ • Supporting Documents • “ADDITIONALITY” – SIGNIFICANT BENEFIT? • Primary • Ancillary • ENOUGH CAPITAL? • Working Capital? • “Stock Test” LexisNexis Pacific 15
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