Inland Revenue has announced relaxations with respect to the Pre-Price Agreement (APA) and compliance with the rules, including possible APA violations during the coronavirus pandemic (COVID-19). Subjects who are parties to the APA must submit an annual report certifying that they are complying with the terms of the contract. The content of the report is based on the concrete facts and circumstances of the subject and constitutes an agreed clause of the APA. This will allow taxpayers to achieve cost savings in compliance with the rules. As an indication, the content may contain such elements as: New Zealand Inland Revenue is currently participating in the OECD project to develop global transfer pricing guidelines during Covid-19, based on the arm length principle. Other international directions will follow. Our approach to completing each APA is tailored to the specific facts and circumstances of the taxpayer, particularly in light of the transfer pricing risks that are addressed. Since each case will be different, we have not put in place a standardized formal procedure. Taxpayers who wish to attend an APA or discuss our likely requirements should refer to the addresses of our “Formal Registration” section. Unilateral APAs take the form of a binding decision. Transfer pricing issues are not considered appropriate for short-term decisions.

The application must be filed at the same time as a completed private decision request – form IR713 and request for a private decision on the transfer pricing agreement – Supplementary statement – form IR713A. The guidelines for the New Zealand Inland Revenue are general. It does not address technical issues related to the application of transfer pricing methods and the determination of arm length conditions related to the pandemic and economic contraction. Delays in database data and extensions of financial reporting requirements are likely to complicate these issues. However, in the absence of comparable data, Inland Revenue indicated that, in the absence of comparable data, tax payers should refer to Covid-19`s expectations and analyze positive and negative differences in terms of revenue, operating costs, unusual expenses, government financial support, intercompany royalties and adjustments, etc. Tax authorities are calling for transparency on all aspects of international agreements. We help our clients comply with the rules and use transfer pricing as a strategic planning tool. This guide recognizes that trade and transfer pricing issues related to covid 19 can vary considerably from company to company and that there may be practical difficulties in applying the arm length principle during this period. Once the review is complete, we will meet with the heads of the other jurisdiction (bilateral APA) or with you (unilateral APA) to discuss disagreements and findings. While awaiting agreement, additional information and views may be exchanged.

In the case of bilateral APAs, we strive to stay in touch with the subject throughout the process to ensure that the outcome agreed between the tax authorities also meets the objectives of the subject.