Ensure your New Zealand transfer pricing documentation is fit for purpose
Changes made last year to New Zealand’s transfer pricing rules are now in force for many taxpayers. Below is a short checklist:
When does the new legislation first apply from?
- For balance dates beginning on or after 1 July 2018.
|Balance date||First year the rules apply to|
|31 March||Year ended 31 March 2020|
|30 June||Year ended 30 June 2019|
|31 December||Year ended 31 December 2019|
What has changed from a pricing point of view?
- Economic substance and actual conduct of parties has priority over the legal terms.
- Emphasis on the comparability analysis and assessment of economically significant risks.
- A transfer pricing arrangement must be shown to be commercially rational.
- Specific transfer pricing rules for cross-border associated party loans over $10m. These rules do not align with standard OECD approach to pricing such instruments and have potential for double tax.
What has changed administratively?
- Documentation format – master file and local file transfer pricing documentation approach as outlined in the 2017 OECD Guidelines.
- Burden of proof is now on the taxpayer to demonstrate that their transfer prices are appropriate.
- Local management is ultimately responsible for ensuring that the transfer pricing documentation is accurate.
- Information gathering powers of the department have increased such that it may be important to consider wider information in preparing documentation than previously.
What do companies need to do?
Prior to filing their tax returns, to avoid potential penalty impost:
- Companies need to ensure reasonable care has been taken in determining their transfer prices policies (e.g. documentation has been prepared).
- Having participated significantly with officials during the drafting of the new transfer pricing rules TPTS have significant experience to enhance your documentation (at competitive prices when compared to Big Firms).
- We would welcome a conversation on your needs. Feel free to contact us for a discussion.
See our recent insight on Transfer Pricing & Covid-19.