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Obtaining certainty 

New Zealand's transfer pricing rules are to be applied consistently with the OECD's Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations - July 2022, including the guidance on business restructurings contained in Chapter IX. We recognise that no general guidance can ever cover off all aspects of complex restructures, so we suggest the best solution is to work co-operatively with us and obtain an advance pricing agreement.

Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD)

Current focus

Business and supply chain restructures are inevitable in global operations as multinationals endeavour to drive efficiencies from their networks in the on-going quest to maximise revenue and minimise costs. New Zealand operations of multinationals do not exist in a vacuum and we are a very open economy by world standards.

Our current focus is on supply chain restructures involving the shifting of any major functions, assets or risks away from New Zealand. We also have a focus on material associated party transactions with no or low tax jurisdictions, including the use of offshore hubs for marketing, logistics and procurement services which are sometimes introduced as part of business restructures.

Our principal concerns in our examinations of supply chain restructures include:

  • the economic substance underlying purported low risk operations such as contract manufacturers and limited risk distributors
  • the consistent return of routine profits
  • the commercial rationale of the rearrangement, taking into account each step in the structure.

Documenting major restructures

Special considerations arise in business restructuring that require explanation. We recommend that transfer pricing documentation is reviewed to ensure that the following questions are addressed.

Question Checklist


Is the fundamental basis for restructuring a:

  • group-wide restructure?
  • regional restructure?
  • one-off local restructure?


Has a three-step functional analysis been carried out:

  • before restructure?
  • to identify acquisitions and disposals?
  • after restructuring?


What consideration has passed:

  • for the transfer of tangible assets and liabilities?
  • for the transfer of intangibles (description required)?
  • for compensation?


Does the acquirer of the functions, assets and risks have the capital and human capability to support the acquisition?


Does the reduced entity provide functions previously undertaken as part of its business activity as a service to the new business owner?


Is the reduced entity rewarded for all functions, assets and risks including those that were not specifically transferred and can still be regarded as profit drivers?


Does the new owner of the restructured business:

  • carry on business wholly or partly in New Zealand?
  • have a permanent establishment in New Zealand?


Who has borne the restructuring costs and has any deduction being claimed on fixed life intangible property as a result of the restructure?


Have valuations been prepared for all asset transfers?


Is documentation available for transfer pricing before and after the restructuring and are documents available in support of the restructuring itself (such as feasibility studies, business plans and consultants' reports)?

Synergistic benefits

The issue may also arise as to the appropriate identification and treatment of synergistic benefits within a multinational enterprise, particularly with respect to business restructures and process improvement projects. Synergies can arise from a number of scenarios including, for example, combined and integrated computer and communication systems, integrated management, combined purchasing power or economies of scale. In each case, it is important to clearly identify the synergy, how it has arisen, which entities have contributed and what impact, if any, it has on intercompany pricing.

Some of our concerns based on recent market observations are as follow.

  • Synergistic benefits are not intangible property. The consequence of this misclassification can lead to an inappropriate attempt to charge a New Zealand entity for a synergistic benefit. This is of particular concern in relation to synergies arising from integrated computer and business systems.
  • Synergistic benefits are sometimes inappropriately allocated to one part of the multinational business (for example, a centralised manufacturer in the case of volume based savings) without regard to all associated parties who have contributed to the savings (for example, the purchasing entities who have contributed to the manufacturer's volume).
  • Comparability adjustments may be necessary where material synergistic benefits are a feature in the tested party's business.

General anti-avoidance

We don't look at restructures only from a transfer pricing perspective.

Restructuring proposals as a whole must make sense commercially without the associated tax benefits. Each step in a wider arrangement also needs to make sense as a business proposition on its own account. If there are unnecessary steps in the arrangement, circularity of fund-flows or novel instruments exhibiting artificiality, the general anti-avoidance rule will be considered in addition to our transfer pricing rules.

Last updated: 20 Jul 2023
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