Inland Revenue continues to ramp up transfer pricing reviews

By Bart de Gouw, Liam O'Brien & Daniel Bendikson

With the release late last week of the 2025 International Questionnaire, Inland Revenue’s flagship transfer pricing and international tax risk assessment tool, it is timely to give an update on some of the recent activity in the New Zealand transfer pricing landscape. We also provide a handy transfer pricing acronym key at the end of the article to decode the unique language of transfer pricing.

New Zealand taxpayers with international operations should take note – transfer pricing continues to be an area of focus for Inland Revenue and being prepared for increased Inland Revenue engagement on this area should be top of mind as we progress through 2026.

Additional Inland Revenue transfer pricing resources

During the 2025 calendar year, Inland Revenue continued to bolster its specialist transfer pricing team, which now comprises four technical specialists (up from two 12 months ago) and ten case leads (up from six 12 months ago), along with the existing three Competent Authorities who sit in the International Revenue Strategy team. As flagged in our September 2024 Tax Alert, we anticipated that Inland Revenue was going to become considerably more active in reviewing and auditing taxpayers, and with this significant increase in resourcing, this is playing out across the taxpayer population, particularly for foreign owned multinationals.

Transfer pricing compliance campaign

An example of this activity is the transfer pricing compliance campaign that Inland Revenue launched on 10 October 2025 – referred to as the ‘2025 TP documentation campaign’. 

Inland Revenue sent information request letters to a group of New Zealand taxpayers that Inland Revenue had identified, primarily through responses to the 2024 International Questionnaire, as having exposure to transfer pricing risk associated with:

• Having significant cross-border transactions
• High-risk transfer pricing transactions and structures.

These initial letters requested copies of the taxpayer’s transfer pricing documentation (including both the New Zealand Local File and the group Master File) for the 2024 income year (which includes balance dates falling between 2 October 2023 and 30 September 2024), as well as intercompany agreements and a summary of the cross-border associated party transactions entered into during the year. Taxpayer’s that received one of these initial letters had approximately five weeks to respond to the information requested.

Inland Revenue performed an initial review of the provided information and in mid-January 2026 issued following up letters notifying of either no further action or, in approximately 80% of cases, that Inland Revenue will be undertaking a more ‘detailed review’ of the taxpayer’s transfer pricing arrangements. Inland Revenue’s questions in this ‘detailed review’ phase have commenced and are detailed. 

Our observations

Areas that piqued Inland Revenue’s interest and which led to further questions being asked include:

•  Use of the profit split method
• Cross border associated party transaction values included in the transfer pricing documentation that do not reconcile with the disclosures included in the New Zealand financial statements
• Transfer pricing documentation that has been prepared offshore with very limited (or no) localisation
• Significant transactions or events (potentially unrelated to transfer pricing) that appear in the financial statements (or in other publicly available information) but are not adequately explained or covered in the transfer pricing documentation
• Benchmarking against companies from markets that Inland Revenue does not consider to be suitably comparable to the New Zealand market, e.g. Asia Pacific
• Loss positions
• Material cross border associated party transactions with low tax jurisdictions
• High levels of inbound related party debt and high gearing levels.

What can taxpayer’s do?

The areas of Inland Revenue interest summarised above can be split into two broad categories – those that are within a New Zealand taxpayer’s control and those that aren’t.

For those items that are within a taxpayer’s control, it is important that the business descriptions and other factual statements in the transfer pricing documentation align with the commercial realities and other publicly available information that Inland Revenue will have access to.

Sometimes, however, there are factors outside of a New Zealand taxpayer’s direct control which nonetheless may trigger interest from Inland Revenue, such as industry wide downturns or one-off transactions (that may or may not be related to related parties).  In these instances, a taxpayer should consider including appropriate commentary/explanations in the transfer pricing documentation or as a supplement to the International Questionnaires to give Inland Revenue comfort that these issues are commercial and not due to non-arm’s length transfer pricing arrangements.  

Inland Revenue expects New Zealand taxpayers to have New Zealand specific transfer pricing documentation to support the pricing applied to cross-border associated party transactions. It is always easier to respond to Inland Revenue information requests when the documentation is prepared contemporaneously (i.e. before the income tax return for a particular income year is filed) rather than scrambling to meet an Inland Revenue information request. Having contemporaneous transfer pricing documentation also assists with penalties if Inland Revenue makes a transfer pricing adjustment as it helps to demonstrate that a taxpayer has taken reasonable care in respect of its transfer pricing positions. 

Proactively managing transfer pricing positions and preparing supporting documentation is critical in the current environment where Inland Revenue is sufficiently resourced to interrogate taxpayer’s positions.

If you have any questions on how to best manage your transfer pricing positions, please contact your usual Deloitte advisor.
 

Acronym key:

IR – Inland Revenue
IQ – International questionnaire
IT – International tax
MNC/MNE – Multinational Corporation/Multinational Entity
TP – Transfer pricing