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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 2: Arrangements involving transfer pricing

You could also call this:

“Rules for fair pricing between related companies to prevent tax avoidance”

This law is about special arrangements that companies might use to avoid paying the right amount of tax. It applies when a company tries to get around rules about pricing things fairly between related companies.

You need to know about four important rules. These rules make sure companies charge each other fair prices. They stop companies from paying too much or getting paid too little on purpose to avoid tax.

Sometimes, companies might make other deals to try to avoid these rules. These could include:

  • Making a deal with a related company in another country
  • Agreeing to split up markets with other companies
  • Agreeing not to enter a market
  • Using middlemen to buy and sell things
  • Sharing income with other companies

If a company tries to use any of these tricks, the tax office can step in. They can change the prices to what they should be if the companies were dealing fairly with each other. This helps make sure everyone pays the right amount of tax.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516874.

Topics:
Money and consumer rights > Taxes
Business > Fair trading
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“Rules for companies keeping past losses when ownership changes”

Part G Avoidance and non-market transactions
Avoidance: specific

GB 2Arrangements involving transfer pricing

  1. This section applies in relation to a person if an arrangement has a purpose or effect of defeating the intent and application of—

  2. section GC 7 (Excess amount payable by person):
    1. section GC 8 (Insufficient amount receivable by person):
      1. section GC 9 (Compensating arrangement: person paying less than arm’s length amount):
        1. section GC 10 (Compensating arrangement: person receiving more than arm’s length amount).

          1. Without limiting the generality of subsection (1), the following collateral arrangements may result in that purpose or effect:

          2. a collateral arrangement with an associated person who is a non-resident:
            1. a market-sharing arrangement:
              1. an arrangement not to enter a market:
                1. a back-to-back supply arrangement:
                  1. an income-sharing arrangement.

                    1. Section GC 7, GC 8, GC 9, or GC 10, as applicable, applies to require the substitution of an arm’s length amount of consideration, despite section GC 6(2) and (3) (Purpose and application of rules and nature of arrangements).

                    Compare
                    Notes
                    • Section GB 2(3): amended, on , by section 37 of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).