2017 Migrant Investor Programme Policy Changes

Immigration New Zealand (INZ) have announced the long awaited policy changes for both the Investor 1 (Plus) Category and the Investor (2) Category.

While the release of these policy changes is a little earlier than expected, the implementation of these policies in May 2017 is a little later than anticipated. This is positive because it allows existing applicants sufficient time to consider whether they can switch under the transitional provisions provided (see below). In addition, new applicants have sufficient time to prepare and submit applications under the existing criteria if they feel the options available to them under the existing scheme are more favourable than when the changes come in May. There is, however, a potential fish hook under Investor 2 that new applicants will need to consider.

Investor Plus Changes – All Positive Stuff

As expected, only minor tweaks were ever going to be considered given the success of this policy. In fact, the updated visa product coming in May is superior to the existing policy for active investors.

The main change is in relation to flexibility around the time spent in New Zealand. Currently Plus applicants are required to spend a minimum of 44 days in each year of the last two years of the three year investment timeframe to satisfy the physical presence requirement. Looking ahead, those who invest a minimum of 25% of their funds in growth-orientated investments (current acceptable investments except for bonds and philanthropic investment) will be permitted to spread the total amount of time required (88 days) over the entire three year investment term, rather than just the last two years. Therefore, on average, an applicant only needs to spend one month in each of the three years, rather than around six weeks in each year of the last two.

The best thing about this is that the government have listened to the private sector, who advised that it is preferable to incentivise active investment rather than prescribe it under policy. The introduced requirement to invest partly in venture capital had a significant impact on the take up for the current Australian investment product. So, the new product we have is even more marketable on the international stage.

For relatively new Plus applicants, a transitional policy has also been put in place where applicants will be assessed on a “case by case basis” and may be able to switch to the new favourable physical presence treatment in May. There is also a possibility that this favourable policy may be (by negotiation) retrospectively applied (positively) to investors who already have over 25% in growth-orientated investments and have clocked up a fair amount of time in year one on conditional resident visas under the existing programme.

Existing applicants, or new applicants prior to May 2017, who intended to keep or establish standard bond portfolios, may consider establishing acceptable investments that hold a minimum of 25% in growth-orientated investments to potentially unlock the new physical requirement flexibility. Investment advisers should now actively raise this for consideration with existing and potential Plus clients.

Investor 2 Category – Major Changes and Hidden Process Risk

There have been substantial changes to the Investor 2 Category which are summarised along with our change notations, as follows:

  • The minimum investment funds have been increased from NZ$1.5M to NZ$3M (negative but also partially neutral: most need around NZ$2.5M now to qualify anyway so practically not a significant lift);
  • Removing the need for NZ$1.0M to be held for “settlement” funds (positive: takes away the issue with applicants using these funds unintentionally – this is an issue we have had to fix for a number of clients);
  • Adding bonus points (20) for investing a minimum of 25% of funds and growth-orientated investments; (positive but also neutral: positive from a NZ benefit point of view as it is not too active or prescriptive to reduce the number of applicants, but whether this will be taken up in large numbers remains uncertain – see flexibility comments below);
  • Increasing the annual cap of Investor 2 migrants from 300-400 places per annum (positive);
  • Adjusting (mostly increasing) points for age, business experience and English language (positive and negative: see jurisdiction related comment below);
  • Flexibility with timing required being 438 days over four years rather than 146 days in each of the three years of the last four year investment term for migrants who have invested 25% or more of their funds in growth-orientated investments (positive and neutral: positive from a NZ benefit point of view but limited benefit to applicants on the basis that most Investor 2 applicants live here. Therefore there is little incentive do this unless they need the bonus points to qualify which they probably won’t need because there is 100 extra places available and a smaller field of participants due to the a higher minimum investment amount required);
  • Allowing up to 15% of investment funds to be made in acceptable philanthropic investments (positive and neutral: positive for NZ benefit but actual benefit in practice questionable, especially as these won’t be considered growth-orientated – a high volume of this is not expected); and
  • Prioritising Investor 2 applicants who intend to place 25% or more of their funds in growth-orientated investments (positive: but extent of acceleration questionable after transition – refer below).

While there’s a number of substantial policy changes coming in for the Investor 2 Category they are not a complete surprise given the consultations we have been involved with over the last few months. We take the following messaging from these changes:

1. A greater number of higher quality applicants are being sought who have the ability to invest a lot more.

2. A clear push for investment away from bonds, but it remains to be seen how effective that will be when the market becomes educated about actual impact to potential eligibility.

3. There is a clear advantage for applicants from Western jurisdictions with the increased points awarded for English fluency, business experience, age, and the incentive to invest 25% in growth-orientated investments. These are typically not favoured by many young Chinese and South East Asian investors who tend to favour bonds.

When the policy changes are in place, existing Investor 2 applicants will have the option to withdraw and re-lodge an application under the new policy. The fee will be waived for processing that application and advice has been provided that they will retain the same place in the “processing queue” if they do so. This can be interpreted to suggest that any applications that have not commenced processing, or have been completed under the “old” policy when the changes commence in May, will be held and have a second priority status over new applications that are received on that date, including the applicants deciding to switch. The reason is that such a delay will create an active incentive for Investor 2 applicants who are in the “managed queue” to shift their investments and adjust to allow their applications to proceed much quicker. This is sensible because of the lengthy investment timeframe. INZ will want as many people as possible to transition under the new categories because there is more benefit to New Zealand. Therefore they will need to create a significant incentive, that is over and above the physical presence flexibility to do so, due to the fact that most Investor 2 live here anyway. It is likely that there will only be a limited number of “quota” places for “old” Investor 2 applicants available and/or if they are available, there will be very lengthy (perhaps significant) waiting times for these old, less preferable applications to be processed.

Our advice is that Investor 2 applicants at the Expression of Interest (EOI) stage, or who have already been invited to apply but have not submitted their applications and either cannot or do not wish to adhere to the new policy criteria, should get on with the process as soon as is possible to try to secure final approval prior to these new changes coming in. This extends to applicants who believe they can meet the new criteria because there is some uncertainty about what points level will be needed to qualify under the new regime. We recommend that if you can qualify now, get on with it.

It is also worth considering the possibility that closer to the release date INZ suspend receipt of new Investor 2 EOI or applications from invited applicants. So the later the process, the greater the risk to these applicants. We have already seen INZ suspend applications in this way under a different category earlier in the year.

Looking Forward

The devil will be in the detail when the finer policy requirements are released in March 2017 and it may be the case that the possible suspension set out above could come in then to mitigate the risk of a surge of applications from jurisdictions such as China just prior to the May start.

In the interim, Investor Plus applicants should look to shift and align with the new policy where there is a benefit in doing so. It is in the best interests of Investor 2 applicants that are not in full process to get applications completed as soon as is possible.