New_Zealand – Transfer Pricing (2025)

Legal framework and scope

New Zealand’s domestic transfer pricing framework is contained in the Income Tax Act 2007, notably in Sections YD 5, YD 5B, GB 2 and GC 6-14. These provisions reference the arm’s length principle and define the scope of transfer pricing rules for cross-border transactions between associated persons. The rules apply to cross-border arrangements between associated persons based on 50% or greater common shareholding or effective control in accordance with Subparts YA and YB of the Income Tax Act 2007, in particular section YB 2(1). Section GB 2 further enables extension of sections GC 7-10 to non-associated parties in circumstances where a collateral arrangement exists (for example market sharing arrangements, arrangements to enter a particular market, back-to-back supply arrangements or income-sharing arrangements).

Arm’s length principle and the role of the OECD Guidelines

New Zealand explicitly incorporates the OECD Transfer Pricing Guidelines 2022 within its domestic rules. Section GC 6(1B) of the Income Tax Act 2007 requires that domestic transfer pricing rules be applied consistently with the OECD Guidelines. Consequently, interpretation and practical application of the domestic provisions align closely with OECD guidance, including chapters concerning methods, comparability, intangibles, intra-group services, financial transactions and the HTVI approach.

Definition of related parties

The domestic framework applies to transactions between «associated persons», defined through ownership and control tests in Subparts YA and YB, with specific reference to section YB 2(1). The operable threshold indicated in the country profile is a common shareholding of 50% or more or effective control. As noted, Section GB 2 allows the domestic rules to be extended to parties that are not strictly associated where collateral arrangements impact pricing or profit allocation.

Methods and criteria for application

The Income Tax Act 2007 recognises the main transfer pricing methods. Section GC 13(2) lists the Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split as methods that may be used. The statutory criterion for selection is the «most appropriate method», set out in Sections GC 13(1) to (3). Section GC 13(1) requires application of the method that provides the most reliable measure of the arm’s length consideration, and Section GC 13(3) mandates that method choice and application take into account the degree of comparability between controlled and uncontrolled transactions. In practice New Zealand follows Chapter III of the OECD Transfer Pricing Guidelines for detailed selection and application guidance.

Comparability and ranges

The domestic rules emphasise comparability: the choice and application of the method must reflect the degree of comparability of the comparables used (Section GC 13(3)). There is no general preference for domestic comparables over foreign comparables; appropriately selected overseas data is accepted where the source market is sufficiently comparable, with Australia commonly recognised as a sufficiently comparable market. Legally, the use of secret comparables is possible, but in practice secret comparables are not used. New Zealand allows the use of arm’s length ranges and statistical measures where appropriate; rather than mandating a specific percentile range, the focus is on the reliability of comparables. If a range comprises results of relatively equal and highly reliable comparables, any point in the range can be regarded as arm’s length. Comparability adjustments are permitted where they improve comparability and assist in reaching an arm’s length price.

Documentation and reporting

There is no explicit statutory requirement to prepare a master file or local file, but New Zealand operates a self-assessment tax system under which taxpayers must keep sufficient records to support their tax positions. This includes transfer pricing documentation for material transfer pricing risks, as required by Section 22 of the Tax Administration Act 1994. New Zealand requires Country-by-Country Reporting consistent with Annex III of Chapter V of the OECD Guidelines where applicable, and aligns with the Master file and Local file recommendations of Annexes I and II respectively. The country profile does not provide specific details on mandatory forms, language requirements, or precise filing deadlines or standardized submission formats; therefore, no specific domestic guidance on forms, languages or timelines is provided in the profile. General tax penalties may apply where an adjustment is made by Inland Revenue, typically ranging from 20% to 40% of the tax shortfall, with penalty determination focused on culpability and the taxpayer’s cooperation.

Safe harbours and simplification measures

New Zealand provides certain simplification measures. A simplified approach for low value-adding intra-group services was initially subject to a NZ$1 million threshold; that threshold has been removed for income years commencing on or after 1 April 2021. Additional simplifications include interest rate simplifications for small value loans where the loan principal does not exceed NZ$10 million in total per year, and simplifications for small wholesale distributors with turnover under NZ$30 million per year. New Zealand does not apply the simplified and streamlined approach for baseline marketing and distribution activities in the Annex to Chapter IV, but it respects the outcome of another covered jurisdiction’s application of that approach in line with the Inclusive Framework political commitment.

APAs and MAP; procedures and timing

The New Zealand tax administration makes available rulings and Advance Pricing Agreements (APAs), including unilateral (noting a unilateral APA is treated as a ruling), bilateral and multilateral APAs, as well as Mutual Agreement Procedures (MAP). The country profile indicates these mechanisms are available and refers to further information maintained by the tax administration. However, the profile does not provide detailed procedural timelines, standard processing periods or statistical averages for APAs and MAPs. Therefore, no specific domestic guidance on procedural timelines for APAs or MAPs is provided in the profile.

Sanctions and other considerations

A primary transfer pricing adjustment by Inland Revenue may give rise to a deemed dividend and potential application of non-resident withholding tax. New Zealand’s administrative practice does not permit unilateral downward corresponding adjustments in the absence of a mutual agreement procedure; downward corresponding adjustments are implemented through the MAP. Year-end adjustments are permitted and may be made to ensure transfer prices and resulting taxable income are consistent with the arm’s length principle, pursuant to Sections GC 7 and GC 8 of the Income Tax Act 2007.

Attribution of profits to Permanent Establishments (PEs)

With respect to tax treaties, New Zealand’s treaties generally contain Article 7 as it read before 2010; the profile indicates 41 treaties contain the pre-2010 Article 7. New Zealand applies the commentary to Article 7 as published in the 2005 version of the OECD Model Tax Convention and has issued a specific reservation to the 2010 commentary and an observation in the 2008 commentary. The profile states that no specific domestic guidance is provided on attribution of profits to permanent establishments; in practice, the approach is consistent with the 2005 Article 7 commentary. Thus, No specific domestic guidance is provided in the profile regarding detailed AOA implementation; attribution practice aligns with pre-2010 commentary.

Conclusion

New Zealand’s transfer pricing regime is firmly grounded in the OECD Transfer Pricing Guidelines 2022 as incorporated into the Income Tax Act 2007. The domestic law mandates application of the most appropriate method that produces the most reliable measure of arm’s length consideration and applies OECD guidance on comparability, intangibles, HTVI, intra-group services and financial transactions. The jurisdiction operates a records-based self-assessment regime requiring taxpayers to retain transfer pricing documentation for material risks, provides various simplification measures and offers dispute prevention and resolution mechanisms including rulings, APAs and MAPs. The country profile does not include exhaustive operational details such as specific procedural timelines for APAs/MAPs or prescribed form-level requirements.

References

See the OECD country profiles page for more information: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html