2 December 2017

NZ government announces Ministerial Directive Letter to the Overseas Investment Office (OIO)

The Letter sets out Government's general policy approach and the importance to be placed on certain factors by the OIO.
New Zealand Government, Public Sector
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The Government has today announced the issue of a new Ministerial Directive Letter (Letter) to the Overseas Investment Office (OIO). Whilst the Letter does not come into effect until 15 December 2017, at that date it will be applied to existing, as well as new, applications. The Letter sets out the Government's general policy approach and the importance that should be placed on certain factors by the OIO. It repeals and replaces the current directive letter issued on 8 December 2010.


As a general policy the Government has stated that they welcome high quality overseas investment that:

  • Generate high levels of benefits to New Zealand;
  • Create new productive assets;
  • Have long standing environmental benefits;
  • Provide economic, environmental, social and cultural benefits to regional communities;
  • Significantly increase value added activities in New Zealand; and
  • Provide for significant participation and oversight (effectively looking at control) by New Zealanders.

There is a noticeable shift in the policy towards environmental factors, which have previously been given little weight as well as control being retained by New Zealanders.

Importance of certain factors

The OIO are to continue to assess overseas investment applications on the basis that they must show benefits to New Zealand that are over and above those which will likely occur anyway.

Rural land

A big change from the previous directive letter is that the 'large farm' directive no longer applies and there is a new 'rural land' directive, being all non-urban land larger than 5 hectares other than 'forest land'. This provides that the following factors be considered of high importance when assessing overseas investments in rural land:

  • Jobs;
  • New technology or business skills;
  • Increased export receipts;
  • Increased processing of primary products; and
  • Oversight and participation by New Zealanders.

Forest land

There is a new directive setting out the factors that should be considered of high importance for an overseas person acquiring forest land (being non-urban land over 5 hectares where the existing principal use is forestry). These are:

  • Increased processing of primary products; and
  • Advance significant Government policy or strategy.

The Letter also instructs that, where applicable, consents should include conditions for entering into supply agreements with local processors.

Sponsorship and community projects

The factor regarding the consequential benefits to New Zealand that includes making sponsorship and donations to community projects has been downgraded to be of low relative importance. This will impact small parcels of sensitive land where it is difficult to show any benefit through investment in the land itself (think small holdings and lifestyle properties).

Overseas persons

Those overseas persons that can show that they are intending to reside in New Zealand indefinitely are not required to show that their investment will result in a likely benefit to New Zealand (repeats existing law). To meet this criteria the Letter instructs that such overseas person should hold a residence class visa or an entrepreneur work visa and show actions or plans to reside in New Zealand within 12 months. This is a tighter restriction than the previous directive letter. It essentially restricts this entry to ordinarily resident persons (think tax resident and the 183 days per year test).

Special land

The Letter potentially makes a subtle nod towards the Crown starting to implement their right to acquire special land. It states that the Crown should acquire special land when it is in the public interest for the Crown to do so. No guidance has been given around what constitutes 'public interest', so we will be eager to see if there is a change in the general stance of the Crown not exercising this acquisition right.

In summary, the main changes are:

  • A stronger emphasis on environmental factors and participation by New Zealanders;
  • The removal of the 'large farm' directive;
  • Implementation of a new 'forest land' directive; and
  • Overseas persons intending to reside in New Zealand must do so within 12 months.

Our view is that the Letter reinforces a sensible balanced approach to overseas investment and how applications are assessed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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