New ZealandNew Zealand

Legal ReferenceSections YD 5, YD 5B, GB 2 and GC 6-14 of the Income Tax Act 2007

Legal ReferenceSection GC 6(1B) of the Income Tax Act 2007

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules apply consistently with these.

Legal ReferenceSubparts YA and YB of the Income Tax Act 2007, in particular section YB 2(1)

New Zealand’s transfer pricing rules apply to cross-border arrangements between associated persons, based on 50% or greater common shareholding or effective control. Section GB 2 can extend the application of sections GC 7-10 to non-associated parties where there is a collateral arrangement (such as a market-sharing arrangement, an arrangement to enter into a particular market, a back-to-back supply arrangement or an income-sharing arrangement).

Legal ReferenceSection GC 13(2) of the Income Tax Act 2007

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (not provided)

Legal ReferenceSections GC 13(1) to (3) of the Income Tax Act 2007

Under section GC 13(1), the method that produces the most reliable measure of the arm’s length amount of consideration must be applied. Section GC 13(3) provides criteria for the choice and application of the method. New Zealand follows the detailed guidance in Chapter III of the OECD TPG.

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (not selected)

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules apply consistently with these. For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed.

Legal ReferenceSection GC 13(3) of the Income Tax Act 2007

Under section GC 13(3), the choice and application of a transfer pricing method must be made having regard to the degree of comparability between the uncontrolled transactions used for comparison and the controlled transactions of the taxpayer. New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules apply consistently with these.

Legal ReferenceComparability analysis

Appropriately selected overseas data is accepted where the source market is sufficiently comparable. Australia is generally recognised as a sufficiently comparable market.

It is legally possible, the domestic legislation provides for the use of secret comparables, but in practice, secret comparables are not used.

Rather than requiring the use of an arm’s length range and/or statistical measures, New Zealand focuses on the reliability of a comparable or comparables and allows the use of an arm’s length range and/or statistical measures in appropriate circumstances. Where a range comprises results of relatively equal and highly reliable comparables, then any point in the range can be regarded as arm’s length.

The use of comparability adjustments is justified to the extent that comparability is improved to arrive at arm’s length pricing.

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules apply consistently with these. It follows the guidance in Chapter VI of the TPG.

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules to be applied consistently with these. It follows the guidance on HTVI in Chapter VI of the TPG.

The conditions for the application of the HTVI are those set out in Chapter VI of the OECD Transfer Pricing Guidelines.

No.

The statute of limitations for all transfer pricing transactions, including HTVI, is seven years after the tax year in which the relevant tax return was originally filed, if the Commissioner notifies the taxpayer that a tax audit or investigation has commenced within four years of the tax return filing. If no such notification has been provided, the statute of limitations is four years.

The HVTI approach has been implemented through the incorporation of the OECD Transfer Pricing Guidelines in their entirety, including the relevant safeguards, and is supported by internal training.

Other: Adjustments are generally made in the income year to which they relate.

Other: Adjustments are generally made in the income year to which they relate.

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules apply consistently with these. It follows the guidance in Chapter VII of the TPG.

Legal ReferenceSimplification measures for transfer pricing

New Zealand initially applied a threshold of $1 million for the low value-adding services simplification measure. The threshold requirement has been removed for income years commencing on or after 1 April 2021.

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules to be applied consistently with these. It follows the guidance in Chapter X of the TPG.

A general summary is as follows: 1. Interest expenditure must meet the requirements of the normal deductibility rules. 2. Interest deductions are subject to the thin capitalisation regime. 3. New Zealand has implemented interest limitation rules for cross-border related borrowing.

New Zealand’s domestic transfer pricing legislation explicitly refers to the OECD Transfer Pricing Guidelines 2022 and requires domestic rules to be applied consistently with these. It follows the guidance in Chapter VIII of the TPG.

Legal ReferenceSection 22 of the Tax Administration Act 1994

There is no explicit statutory requirement to prepare a Master file or Local file. However, New Zealand’s tax system operates on a self-assessment basis, where the taxpayer is required to keep sufficient records to support its tax position. This includes transfer pricing documentation for material transfer pricing risks.

• Master file consistent with Annex I to Chapter V of the TPG (selected)
• Local file consistent with Annex II to Chapter V of the TPG (selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
• Other (specify): (not selected)

There is no explicit statutory requirement to prepare a Master file or Local file. New Zealand’s tax system operates on a self-assessment basis, where the taxpayer is required to keep sufficient records to support its tax position. This includes transfer pricing documentation for material transfer pricing risks.

General tax penalties may apply where an adjustment is made by Inland Revenue, normally 20% to 40% of the tax shortfall. Determination of the penalties focuses on culpability and the level of co-operation by the taxpayer.

Legal ReferenceNew Zealand’s MAP Profile

Further information on New Zealand’s APA programme can be found at Advance pricing agreements (ird.govt.nz). (Note, in New Zealand a Unilateral APA is a Ruling). Further information on New Zealand’s MAP programme can be found at Mutual agreement procedure (MAP) (ird.govt.nz).

• Rulings (selected)
• Enhanced engagement or cooperative compliance programmes (selected)
• Advance Pricing Agreements (APA) (selected)
• Unilateral APAs (selected)
• Bilateral APAs (selected)
• Multilateral APAs (selected)
• International Compliance Assurance Programme (ICAP) (not selected)
• Mutual Agreement Procedures (selected)

Legal ReferenceSimplification measures for transfer pricing (ird.govt.nz)

Simplification measures are available for low value-adding intra-group services in in accordance with OECD TPG; interest rates for small value loans where the loan principal does not exceed NZ$10m in total per year; and small wholesale distributors with a turnover under NZ$30m per year.

New Zealand’s administrative practice is to implement downward corresponding adjustments through the mutual agreement procedure.

Legal ReferenceSections GC 7 & 8 of the Income Tax Act 2007

Year-end adjustments may be made to ensure that transfer prices and resulting taxable income are consistent with the arm’s length principle.

A primary adjustment made by Inland Revenue may give rise to a deemed dividend and the potential application of non-resident withholding tax.

Legal ReferenceBranches

Article 7 as it read before 2010.

• Article 7 as it read before 2010. (selected)
• Article 7 as it reads after 2010. (not selected)

Legal ReferenceBranches

New Zealand applies the commentary to Article 7 as published in the 2005 version of the OECD Model Tax Convention. New Zealand has made a specific reservation to the 2010 commentary of Article 7 and an observation in the 2008 commentary to Article 7 of the Model Tax Convention.

Legal ReferenceBranches

No specific domestic guidance is provided, in practice the approach is consistent with the commentary to Article 7 as published in the 2005 version of the OECD Model Tax Convention.