Inland Revenue’s transfer pricing focus continues

By Bart de Gouw, Liam O’Brien & Cristy Yun
 

Winter may have arrived, but Inland Revenue’s transfer pricing activity is showing no signs of cooling down.

Inland Revenue is continuing to adopt a more active and targeted approach to transfer pricing and international tax compliance, with new targeted campaigns already underway and a further transfer pricing documentation campaign expected in late 2026.

We regularly engage with Inland Revenue to understand areas of focus and new developments. This article provides four key takeaways and insight into Inland Revenue’s current areas of focus, anticipated compliance campaigns, Inland Revenue’s expectations for benchmarking and its current position on the implementation of the OECD Amount B in New Zealand.

Consistent with the themes of our recent Tax Alert articles (see our February 2026 and April 2026 articles), transfer pricing remains firmly on Inland Revenue’s radar. Taxpayers should therefore be prepared for increased Inland Revenue scrutiny and should ensure transfer pricing positions are supported by robust, locally relevant documentation and defensible benchmarking aligning with Inland Revenue’s expectations as we prepare to file 2026 income tax returns and progress through the 2026/27 income year.

Key takeaways from recent Inland Revenue engagement

Based on our recent engagement with Inland Revenue, we have identified four key takeaways that New Zealand companies should be conscious of.

1. 2026 Transfer pricing documentation campaign (expected in late 2026)

Inland Revenue expects to launch another transfer pricing documentation campaign in late 2026, which is likely to cover the cross-border associated party transactions entered into by New Zealand taxpayers during the 2025 income year (which includes balance dates falling between 2 October 2024 and 30 September 2025). The campaign is expected to follow a similar process and format to the “2025 TP documentation campaign” launched in late 2025.

As part of the 2025 campaign, Inland Revenue issued information request letters to selected New Zealand taxpayers identified as having elevated transfer pricing risk (e.g. taxpayers with significant cross-border transactions and/or high risk transfer pricing transactions and structures). Taxpayers were required to provide transfer pricing documentation (including both the New Zealand Local File and the group Master File), intercompany agreements and a summary of the cross-border associated party transactions entered into during the year. Taxpayers that received one of these initial letters had approximately five weeks to respond to the information requested.

Following its initial review of the provided information, Inland Revenue issued letters notifying of either no further action or, in most cases, progressed to a detailed review phase, where further detailed information was requested. See our February 2026 article for further detail on the 2025 TP documentation campaign process and areas that piqued Inland Revenue’s interest which led to further questions being asked.

Inland Revenue continues to use its International Questionnaire as a key risk assessment tool. For the 2026 TP documentation campaign, it will select candidates primarily based on their responses to the International Questionnaire for the 2025 income year.

In light of Inland Revenue’s heightened expectations for transfer pricing documentation and the upcoming TP documentation campaign, taxpayers should ensure their transfer pricing documentation for the 2025 income year is up to date, accurately reflects the facts and circumstances of the New Zealand business (rather than generic high-level documentation that is prepared centrally by the group without thorough localisation), and is aligned with Inland Revenue’s expectations as outlined on their website and summarised in our April 2026 article.

2. Inland Revenue expectations for comparable company benchmarking studies

Inland Revenue continues to place strong emphasis on the geographic comparability of companies used in benchmarking studies and has emphasised that sets using companies from markets that Inland Revenue does not consider to be suitably comparable to the New Zealand market are unlikely to be accepted and more likely to be reviewed by Inland Revenue. Specifically:

• Preference for Australia/New Zealand comparable companies – Inland Revenue expects benchmarking sets to be based on Australia and New Zealand comparable companies as much as possible, as Inland Revenue considers these markets to be most comparable to the New Zealand market. While geographic scope may be expanded in certain cases, Inland Revenue considers that this does not typically result in more reliable benchmarking outcomes and such expansions are therefore not encouraged in practice.
• Use of US/UK comparables may elevate review risk – While US and/or UK companies may be used to supplement Australasian datasets in some circumstances, Inland Revenue has indicated the inclusion of comparable companies from these markets is more likely to lead to additional questions or attention from Inland Revenue.
• Increased scrutiny of APAC comparables – Benchmarking studies that rely heavily on Asia-Pacific comparables (particularly studies including a significant proportion of South-East Asian companies) are likely to attract closer review, as Inland Revenue does not consider these markets to be sufficiently comparable to New Zealand. Based on our recent engagement with Inland Revenue (including through the 2025 TP documentation campaign), this is an area likely to prompt further Inland Revenue queries.

3. OECD Pillar One Amount B – Inland Revenue position

The OECD’s Pillar One Amount B simplification measure for baseline marketing and distribution activities has now been finalised and incorporated into the OECD Transfer Pricing Guidelines, with potential application for fiscal years starting on or after 1 January 2025.

However, Inland Revenue has confirmed that New Zealand will not adopt Amount B in its current form and will continue to apply existing transfer pricing rules. In practical terms, this means Amount B will not be recognised for New Zealand tax purposes, whether in an inbound or outbound context.

For New Zealand taxpayers, this will have the following implications:

• Amount B will not apply under New Zealand’s double tax treaties and therefore will not be relied on in Mutual Agreement Procedure processes.
• The application of Amount B to transactions with jurisdictions that do apply Amount B does not discharge a taxpayer’s burden of proof in New Zealand. Taxpayers are still required to support their transfer pricing positions under the standard arm’s length principle, by preparing and maintaining appropriate transfer pricing analysis for distribution arrangements, even if the wider multinational group has adopted Amount B in other jurisdictions (e.g., if the group intends to implement Amount B as part of a group-wide approach to distributor returns).

4. New intangible property questionnaire (responses due by 25 June 2026)

Inland Revenue has recently launched an intangible property questionnaire targeting New Zealand taxpayers that made outbound royalty payments during the 2024 income year. The response to the questionnaire is due on 25 June 2026.

This campaign is driven by Inland Revenue’s review of 2024 International Questionnaire responses, where it has identified taxpayers paying relatively high royalties, while reporting low profitability or losses.

The purpose of the questionnaire is to better understand the nature of royalty payments, the underlying intangible property, and whether the level of payments is consistent with the value derived. Selected taxpayers are required to provide detailed information, including:

• Financial information for the 2024 income year and explanations for the drivers of losses or low profitability
• Details on the intangible property – including the type of intangible property, how the IP is being exploited in New Zealand, and copies of the legal/licensing agreements for these arrangements
• A breakdown of all payments made by the New Zealand taxpayer relating to the intangible property (e.g. royalties, licence fees, franchise fees etc.) during the year to associated and non-associated persons within New Zealand and located overseas
• Name and IRD number of the entity that makes the intangible property payments
• Where the payments are paid to a non-resident associated person, an explanation or transfer pricing documentation / benchmarking analysis to support the arm’s length nature of the payments.
• Inland Revenue will also review the non-resident withholding tax (NRWT) treatment of royalty payments and requires an explanation where NRWT has not been deducted on payments to non-residents.

This new campaign reflects Inland Revenue’s increased focus on royalty payments and intangible property arrangements. In light of this, it is important that taxpayers review their cross-border royalty policies and reassess whether current payments to, or receipts from, offshore related parties remain arm’s length and are appropriately supported by transfer pricing documentation/legal agreements.

If you have any questions on how to best manage your transfer pricing positions and prepare transfer pricing documentation or respond to one of the above information requests, please contact your usual Deloitte adviser.