Too often we have seen how any tax debt can become quickly overwhelming if it is not managed properly. For those who attempt to stick their head in the sand in the hope that the problem will magically disappear (which unfortunately happens more often than you may think), the consequent penalties and use-of-money interest (UOMI) charges can double the size of a debt in a short amount of time.
“It’s not the load that breaks you down, it’s the way you carry it.” Lou Holtz.
For many, receiving a letter from the Inland Revenue (IRD) advising that they have decided to undertake a risk view in relation to a certain transaction or tax position taken, can certainly make the heart skip a few beats, even when the correspondence was somewhat expected – perhaps due to a large GST refund claim having been made.
IRD reviews and audits can become very time consuming and expensive, particularly in cases where the person under review perhaps cannot provide all the information requested, or responds to a certain question in a way which creates confusion or suspicion in the mind of the IRD officer – remember the old saying, first impressions count.
Our tax partner, Richard Ashby, leads the GS tax team and he has over 30 years’ experience in dealing with New Zealand taxation issues, including a number of years he worked at the Inland Revenue, where he spent time within the investigations unit.
Trying to interpret tax laws and thereby determine their application to your situation, can be as challenging as trying to understand a foreign language that you have not encountered before. And even then, if you reach a basic level of appreciation where you think that you now have a clear view of your playing field, the landscape is then complicated by the fact that tax law does not remain constant, and is subject to ongoing updates.
We aim to help companies manage risks associated with an Inland Revenue transfer pricing audit, by providing advice surrounding the use of appropriate transfer pricing methodologies, tailored to your specific business. We can also assist with the preparation of appropriate Transfer Pricing Documentation, one of the first things Inland Revenue will request should they decide to conduct a review on your cross-border transactions. There is no statutory requirement for taxpayers to prepare this documentation, however the burden of proof is on the taxpayer to demonstrate that the ‘transfer price’ is consistent with the arm’s length principle.
