What changed on 31 March 2026
Inland Revenue refreshed its transfer pricing documentation guidance. The legislation did not change: New Zealand still does not require documentation to be filed with the return, and the master file and local file approach in the OECD guidelines still applies. What changed is the clarity of Inland Revenue’s expectations, and its stated tolerance for documentation that does not meet them.
Three things the guidance makes explicit
- Local relevance. Documentation prepared centrally for a group must be localised. A master file and a generic local file template are not, on their own, adequate support for the New Zealand entity’s pricing. The analysis has to reflect the New Zealand entity’s own functions, assets, risks and results.
- Local accountability. Local management is responsible for the accuracy of the documentation and for the arm’s-length outcome. “Head office prepared it” is not a defence.
- Penalties are more likely, not merely possible. Where documentation is inadequate and Inland Revenue makes an adjustment, a shortfall penalty of up to 40% for gross carelessness is the likely starting point. Adequate, contemporaneous documentation is the main evidence that reasonable care was taken.
Who is affected
Any New Zealand taxpayer with cross-border associated-party transactions: subsidiaries of foreign groups, New Zealand groups with offshore operations and businesses funded by related parties overseas. Inland Revenue’s stated priorities include unexplained losses in foreign-owned groups, loans above $10 million and guarantee fees, royalties and service charges that look unsustainable, material transactions with low or no tax jurisdictions, and supply chain restructures that move functions, assets or risks out of New Zealand.
The campaigns
Inland Revenue ran a transfer pricing documentation campaign in late 2025 and a further campaign covering 2025 income year transactions is widely expected in late 2026. A campaign letter asks what documentation exists and whether it was prepared before the return was filed. The quality of that first answer shapes everything that follows.
A practical checklist before you file
- Is there a local file for the New Zealand entity, written in the last twelve months, that a New Zealand reviewer could read without the group file beside it?
- Does it describe the business as it actually operates today, including any restructuring, new funding or new intercompany flows?
- Is each material transaction supported by a benchmark that is current and uses the right tested party?
- For loans above $10 million and guarantees, has the pricing been tested under New Zealand’s rules for related-party debt, not only the group policy?
- Do intercompany agreements match the documented policy and the conduct of the parties?
- Can local management explain and stand behind the results?
Common mistakes
- Treating the group master file as the New Zealand documentation.
- Rolling forward last year’s report without updating the facts.
- Benchmarks that are several years old, or that test the wrong party.
- Distributor margins below the ranges Inland Revenue uses for its risk reviews, with no explanation prepared.
- Documentation written after a questionnaire arrives, rather than before the return was filed.
When to seek advice
Before the next return is filed, if any of the checklist answers is no. Immediately, if a campaign letter or questionnaire has arrived. Our two-minute transfer pricing health check gives an indicative view, and a confidential discussion with a partner will tell you whether there is something to do.
General information, not advice on your situation. Talk to a partner before acting on it.
