Inland Revenue has released its refreshed Multinational Compliance Focus (MCF) document. The document provides valuable insights into current Inland Revenue focus areas in relation to multinationals, and the approach being taken to enforce tax compliance. Overall, Inland Revenue’s approach remains focused on helping taxpayers get it right from the start, with interventions for those who do not.
The content of the MCF document is consistent and reinforces the general approach that Inland Revenue has indicated over recent months, focussing more on compliance activities across the New Zealand tax base.
Here are our key takeaways from the refreshed MCF:
- The risk areas and themes Inland Revenue has identified are similar to those we’ve seen before, with a heavy focus on information gathering and targeted compliance efforts. Intangible property, transfer pricing, losses and financing arrangements remain particular areas of interest.
- Continued focus around tax governance and compliance ‘by design’ - Inland Revenue continues to increase expectations around multinationals having adequate processes and controls in place to detect and prevent compliance errors, including tailoring for the New Zealand context.
- Expanded sources of intelligence - Inland Revenue is a significant importer of data from other tax authorities, and benefits from increased tax transparency internationally. This data is being fed through data and analytics tools in conjunction with various other data sources to inform Inland Revenue’s risk rating of multinationals. Check out our key transfer pricing takeaways for further insights on this. Key domestic sources of information include the Companies Office, Customs data and Overseas Investment Office information.
- Active participation with other tax authorities and in OECD forums - Inland Revenue is continuing to update New Zealand’s tax treaty network including current renegotiations with Australia and the United Kingdom. More broadly, Inland Revenue continues to engage in OECD-led initiatives, including Pillar One, Pillar Two and enhanced dispute resolution. It is actively participating in the OECD-led project focused on global mobility and remote workers, which will be one to watch for multinationals who have travelling executives and senior decision-makers.
In line with Inland Revenue’s comments, we are seeing more compliance activity in the market relative to the past few years, and we expect to see risk review activities progress into tax audits and disputes more quickly, as indicated by Inland Revenue in various forums. Targeted interventions will likely be where errors arise as a result of not having adequate frameworks, processes or controls in place, or where there is deliberate non-compliance.
We are pleased that Inland Revenue also acknowledges that the large majority of multinationals in New Zealand are compliant and proactively fulfilling their tax obligations. Inland Revenue has commented that the data gathered has been helpful to counter the narrative that large multinational enterprises are not paying their “fair share” of tax in New Zealand under current law.
We are here to help - please contact us if further discussion on any element of the MCF would be useful.
