Current focus
Transfer pricing focus in 2009
As we head into 2009, transfer pricing remains as important as ever in terms of the international scene. We will continue to cover the full range of both inbound and outbound associated party transactions this year, with special emphasis on issues arising from the economic events of the last 18 months, in particular:
- any arrangements made to import offshore losses through non-market pricing
- potential gaming of interest rates, taking undue advantage of gyrations experienced in credit spreads, and
- adventurous pricing of hybrid financial instruments (such as mandatory convertible notes).
We will be monitoring closely those foreign enterprises operating limited risk structures in New Zealand, such as limited risk distributors/commissionaires and contract/toll manufacturers. Our expectation is that profits of such entities will be maintained, unless there are very good reasons to the contrary.
We are also aware of pressures building on company balance sheets as a result of losses and asset write-downs. We will be reviewing compliance with our thin capitalisation rules, especially in respect of those groups carrying above average debt.
Remember, it is the responsibility of local management to ensure a company’s transfer prices are in accordance with the arm’s length standard. If a major downward shift in profitability has occurred over the last 18 months, we recommend that the reasons behind such a result be fully documented and supporting evidence maintained to explain the tax position in due course to us.
Date published: 19 Feb 2009
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