International transfer pricing : a survey of practices, tax-audit, and strategies for managing tax uncertainty by foreign owned subsidiaries in New Zealand

Abstract

International Transfer Pricing (ITP) tax guidelines and regulations have been recentlyintroduced in New Zealand. These guidelines allow a number of transfer pricing methods.This paper examines international transfer pricing practices of New Zealand basedmultinational companies, the likelihood that these companies would experience a tax-audit by the taxation authority, and the mechanisms these companies use to minimize tax uncertainty. The key findings include that tangible goods is the most common intercompany transfers; cost plus method is the most common transfer pricing method; tax audits by Inland Revenue Department (IRD) are positively associated with company size; the greater the volume of its intercompany transfers, the more likely that a company would have an Advance Pricing Agreement(APA)with the IRD or would consider an APA in the future.