Transfer Pricing
Country Summary
New Zealand
This document discusses New Zealand’s transfer pricing regulations and guidelines. While not mandatory, New Zealand recommends the use of OECD’s Master File and Local File approach for transfer pricing documentation. New legislation addresses the OECD’s BEPS initiative. It emphasizes Country by Country Reporting (CbCR) for corporate groups. The tax authorities focus on specific areas during audits, and maintaining transfer pricing documentation is prudent for taxpayers.
Overview:
OECD Alignment:
New Zealand closely follows OECD Transfer Pricing Guidelines and encourages the use of the Master File and Local File approach, even though it’s not mandatory. The country endorsed OECD’s recommendations on transfer pricing documentation.
BEPS Initiative:
In July 2018, New Zealand implemented legislation addressing the OECD’s Base Erosion and Profit Shifting (BEPS) initiative. This aligns with the Multilateral Competent Authority Agreement on exchanging Country by Country Reports (CbCR).
Related Parties:
New Zealand’s definition of related parties is based on voting rights, market value, income interest, and control. Collateral arrangements can also extend transfer pricing rules to non-associated parties.
Transfer Pricing Documentation:
While not explicitly required by statute, it’s considered wise to maintain transfer pricing documentation to demonstrate alignment with the arm’s-length principle. The IRD recommends a cost-benefit analysis to determine the depth of documentation.
Tax Havens:
Though not a tax haven, New Zealand offers structures for offshore entities to save on taxes, with privacy laws akin to tax havens.
Advance Pricing Agreement (APA):
New Zealand supports the issuance of unilateral, bi-, or multilateral APAs under mutual agreement procedures. The IRD promotes APAs to avoid lengthy audits.
Audit Focus:
The IRD focuses on various areas, including tax losses, large loans, royalties, transactions with low-tax jurisdictions, offshore hubs, e-commerce income, supply chain restructures, and unusual arrangements.