Why it matters
When companies in the same group trade with each other across borders, the price they use decides how much profit is taxed in each country. Tax authorities want the price to be the one independent parties would have agreed, so that profit is not shifted out of their jurisdiction. That standard is the arm’s-length principle, and transfer pricing is the discipline of applying it and proving it.
Who needs to think about it
Any business with transactions between associated parties in different countries: a New Zealand subsidiary buying stock from its parent, a group charging management fees, a parent lending money to a subsidiary, a licence of software or brand between group companies, or shared services provided from a hub. The amounts do not have to be large for the rules to apply, although Inland Revenue’s attention scales with the size and risk of the transactions.
What Inland Revenue expects
New Zealand follows the OECD transfer pricing guidelines. The burden of proof sits with the taxpayer, which means the business must be able to show that its prices are arm’s length. In practice that means documentation prepared before the return is filed, with a functional analysis of the business, a method for each transaction and benchmarking evidence. Inland Revenue refreshed its documentation guidance in March 2026 and expects group documentation to be localised for New Zealand.
What happens if it is wrong
Inland Revenue can adjust the price, which creates additional tax in New Zealand, and the same profit may already have been taxed in the other country. Shortfall penalties of up to 40% can apply where documentation is inadequate. Tax treaties provide a process for relieving double taxation, but it takes time and is far more expensive than getting the pricing right in the first place.
When to get advice
Before the first intercompany transaction of a new kind, before a restructuring, before significant related-party funding, and before responding to anything from Inland Revenue about related-party transactions.
General information, not advice on your situation. Talk to a partner before acting on it.
