Current focus
Transfer pricing focus in 2011-2012
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 remaining on issues arising from the economic events of the last three years, in particular:
- losses - ensuring they haven't come from non-market pricing
- thin capitalisation - especially in groups carrying above-average debt that may have been exposed to losses and asset write-downs.
We will also be closely monitoring New Zealand-owned multinationals for the possible importation of losses from overseas subsidiaries using non-arm's length subsidies and support payments.
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 three years, we recommend that the reasons behind such results be fully documented and supporting evidence maintained to explain the tax position in due course to us.
New controlled foreign company rules apply from the 2010 income year. So, transfer pricing rules now have more significance for controlled foreign companies, and we've added several questions to our disclosure form to reflect this. We'll follow up any unusual patterns or trends that emerge.
We're redirecting our resources so we can manage more requests for advance pricing agreements (APAs). These can provide certainty by resolving potential transfer pricing disputes early and reducing compliance costs, especially for complex cases involving intangibles or restructuring.
Date published: 11 Aug 2011
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