Transfer pricing compliance & documentation

Transfer pricing refers to the rules and methods for pricing transactions between related entities (like parent companies and their subsidiaries). It matters because tax authorities want to ensure profits are allocated fairly between countries based on where value is created. Without proper transfer pricing, companies could potentially shift profits to low-tax jurisdictions, which is why tax authorities worldwide have implemented specific regulations to ensure transactions occur at "arm's length" prices.

Yes. Both Australia and New Zealand follow OECD guidelines requiring businesses to demonstrate their related-party transactions are conducted at arm's length. While the specific documentation requirements differ slightly between countries, both jurisdictions expect adequate supporting documentation for cross-border transactions. The risk of not having proper documentation includes potential penalties, adjustments, and more intensive audits.

Ideally, transfer pricing considerations should be part of your business planning from the moment you contemplate expanding across borders. Waiting until after establishing international operations often leads to inefficient structures that are costly to unwind. If you've already expanded internationally without addressing transfer pricing, now is the time to review your arrangements to ensure compliance and optimise your structure.

TPEQ offers senior-led expertise with direct partner involvement throughout your engagement. Unlike larger firms where work is often delegated to junior staff, our partners personally handle your transfer pricing matters. We combine Big Four technical rigor with boutique flexibility and responsiveness. Our specialised focus on Australasia means we deeply understand local nuances while providing commercially pragmatic solutions tailored to your specific business needs.

While we serve clients across all sectors, we have particular depth in manufacturing, technology, retail, financial services, and pharmaceuticals. Our approach adapts to each industry's unique characteristics while applying consistent technical excellence. Rather than offering generic solutions, we tailor our services to address the specific transfer pricing challenges relevant to your industry and business model.

The cost varies based on your business complexity, transaction types, and documentation needs. Simple structures with limited transaction types might require basic documentation, while complex global operations with numerous intercompany transactions require more comprehensive analysis. We provide transparent, fixed-fee quotes for most engagements after understanding your specific situation. Contact us for a no-obligation discussion about your needs and associated costs.

Transfer pricing documentation should be reviewed and updated annually to remain compliant with both Australian and New Zealand requirements. Significant business changes (new product lines, restructuring, entering new markets) also warrant immediate documentation updates. Beyond compliance, regular updates ensure your transfer pricing approach continues to align with your evolving business strategy and changing market conditions.

Country-by-Country Reporting (CbCR) is required for multinational enterprise groups with annual consolidated revenue exceeding €750 million (approximately A$1 billion or NZ$1.2 billion). CbCR provides tax authorities with information about global allocation of income, taxes paid, and business activities for each tax jurisdiction in which the group operates. Even if you're below this threshold, aspects of the CbCR framework may still influence your documentation requirements.

Without proper documentation, you face increased audit risk, potential tax adjustments, penalties, and double taxation. In Australia, Significant Global Entities (SGEs) are subject to failure-to-lodge penalties of up to A$782,500 if filings are more than 112 days late. Transfer pricing adjustments can also trigger penalties of up to 50% of any tax avoided. SGEs may face further penalties of 50%, 100%, or even 150% of a shortfall amount for making false or misleading statements.

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In New Zealand, while the legal burden of proof remains with the taxpayer, documentation is the only way to discharge that burden. Without it, Inland Revenue can reconstruct your transactions based on their own interpretation potentially leading to significant adjustments, penalties and Use of Money Interest.

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Beyond the financial risk, poor documentation weakens your audit position and may damage your relationship with tax authorities. Proper documentation serves as both compliance and protection.

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Several factors increase audit risk, including: consistently reporting losses while the wider group is profitable, transactions with low-tax jurisdictions, significant management or royalty fees, major restructures, and inconsistencies in financial reporting. Financial arrangements are also under increasing scrutiny; particularly intercompany loans, syndicated or exotic instruments, debt versus equity characterisation (especially for thinly capitalised entities), and whether the level of debt aligns with the arm’s length principle under local rules such as Australia’s “arm’s length debt test.”

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Tax authorities also target specific industries and structures through focused audit campaigns. TPEQ can conduct a tailored risk assessment to help you understand your vulnerabilities and develop a clear mitigation strategy.

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We start by conducting a thorough review of your existing documentation and transfer pricing positions to identify both strengths and potential vulnerabilities. From there, we develop a strategic response plan, coordinating closely with your team to manage information requests and deadlines efficiently.

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Throughout the audit, we engage constructively with tax authorities while firmly defending technically sound positions. Many of our clients, especially those we’ve supported with ex ante pricing have faced audits around the world, and our pricing work has consistently been accepted without adjustment. In several cases, robust documentation has even prevented audits from proceeding beyond initial queries.

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While audits are an inevitable part of long-term international operations, our goal is to make the process as smooth and low-risk as possible.

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Our approach begins with a thorough review of your documentation and positions to identify strengths and potential vulnerabilities. We then develop a strategic response plan, working closely with your team to manage information requests effectively. Throughout the audit, we maintain constructive dialogue with tax authorities while robustly defending technically sound positions. Our track record of zero adjustments reflects our effective approach to audit management.

APAs can provide certainty for complex or high-value transactions by establishing an agreed methodology with tax authorities in advance. They're particularly valuable for arrangements that might otherwise face scrutiny or when operations in multiple jurisdictions create significant double taxation risks. However, APAs require resource commitment and information disclosure. We can help assess whether an APA would be beneficial in your specific circumstances.

Environmental, Social, and Governance (ESG) factors are increasingly important in transfer pricing. This includes pricing of carbon credits between related entities, allocation of sustainability-related costs, and valuation of "green" intangibles. Tax authorities are also placing greater emphasis on tax transparency as part of broader ESG reporting. TPEQ helps clients integrate ESG considerations into transfer pricing policies, ensuring alignment between sustainability goals and tax strategies.