Importing goods? Will the Provisional Values Scheme help you?

By Jeanne du Buisson, Haidee Watkin & Sid Mahajan
 

Are you importing goods into New Zealand that are subject to post importation adjustments such as royalties, licence fees or transfer pricing arrangements?  New Zealand Customs (Customs) are continuing to focus efforts on compliance activities, so now more than ever it is important for importers to consider the valuation of goods that come across the New Zealand border.

The Provisional Values Scheme (PVS), allows importers that are unable to determine the import value of goods at the time of importation, or for importers who expect that the customs values of goods will change post-importation (i.e., transfer pricing adjustments or royalty arrangements), to use a “reasonable estimate” for the purposes of determining the customs value of an imported good.

Once enrolled into the PVS, an importer is required to perform a reconciliation of the import entries codes as provisional estimates to the final amounts. If the reconciliation determines an overpayment in duties, an importer is able to obtain a refund from Customs, and conversely, an importer will not be liable to pay any penalties or interest if the reconciliation determines an underpayment in duties and GST.

Who qualifies under the Provisional Values Scheme?

An importer may automatically qualify to use provisional values if any of the following criteria apply:

Transfer Pricing Criteria

• Private binding ruling (unilateral advance pricing agreement) on transfer price from Inland Revenue; or
• Bilateral advance pricing agreement (BAPA) from Inland Revenue; or
• Multilateral advance pricing agreement (MAPA) from Inland Revenue.

Licence and Royalties Criteria

• An importer uses the transaction value method to determine the customs value of imported goods; and
• Needs to include royalties and license payments in the customs value; and
• The amount of those payments can only be established post-importation.

Further Proceeds Criteria

• An importer uses the transaction value method to determine the customs value of imported goods, but at the time of entry the importer does not know the final amount of further proceeds of sale.

Importers that automatically qualify are still required to notify Customs of their intention to enrol into the PVS and use provisional values, prior to importing using the PVL indicator. An importer that does not meet one of the three criteria listed above can make an application to Customs to use provisional values at the time of import.

What are the benefits to the PVS?

An importer that is enrolled in the PVS scheme can enter goods into New Zealand at a "provisional amount” which is a “reasonable estimate” of the final value of the goods imported and reconcile these provisional amounts to actuals within 12 months of balance date. This allows the importer time to calculate any required year-end adjustments without incurring any compensatory interest on underpayments of duties.  Without the ability to use provisional values, an importer that incurs costs post-importation may be required to submit a Voluntary Disclosure to Customs in the event of a significant variation between imports declared and the actual amounts incurred (factoring in any post importation costs).

Wider Implications

Given the High Court of New Zealand’s findings in the Country Road case (as discussed in the August 2024 Tax Alert), it is now more important than ever for importers to consider any costs they may be incurring post importation and whether these costs are reflected in the value of an imported goods.

As Customs’ increased compliance activity in this area is continuing in 2025, now is as good a time as ever to get in touch with your Deloitte advisor to discuss if your organisation will benefit from enrolling in the Provisional Values Scheme.