Controlled foreign companies

From the 2010 tax year, New Zealand’s taxation rules for controlled foreign companies ("CFCs") have been amended to include an active/passive division. This means that transfer pricing compliance takes on new significance.

For many enterprises, the comprehensiveness of the old CFC rules meant that little attention has been paid to transfer pricing matters, the approach being that a zero sum game would generally result from any lack of pricing policies.  Even if this held true, the new CFC rules are less complete and so most definitely put an end to this approach.

We recommend that adequate transfer pricing documentation is in place to ensure transfer prices involving CFCs are in accordance with the arm's-length standard.  In terms of our compliance programme, several additional questions have been added to the CFC disclosure form and far more focus will be given to CFCs in future audits.

Date published: 02 Dec 2010

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