Pillar One: New Zealand will not adopt ‘Amount B’
We have received confirmation that New Zealand will not adopt “Amount B” under the OECD’s proposed Pillar One transfer pricing methodology. Instead, New Zealand will continue to apply its existing transfer pricing methodologies.
Quick recap
Over the last few years, the OECD has been developing a two-pillar framework to address the tax challenges arising from the digitalisation of the economy.
Pillar One aims to ensure a fairer distribution of profits and taxing rights between jurisdictions, whilst Pillar Two aims to limit jurisdictions’ ‘race to the bottom’ with respect to their corporate tax rates.
Within Pillar One, Amount A allocates a taxing right to jurisdictions based on the presence of consumers or users, whilst Amount B is a methodology to price certain baseline wholesale marketing and distribution activities. Please refer here for the OECD’s statement on the two pillar solution released in 2021.
What does this mean?
It means there will be no changes to New Zealand’s current transfer pricing rules or practices. Our existing transfer pricing approaches must be applied when:
determining arm’s length outcomes for foreign-owned distributors operating in New Zealand; and
considering the transfer pricing obligations of New Zealand-owned distributors operating offshore.
This means there is potential for misalignment between New Zealand and those countries who choose to adopt Amount B. To the extent that double taxation arises from misalignment, no relief will be provided under New Zealand’s double tax treaties.
The implications of this will need to be further considered when the list of countries adopting Amount B are confirmed. In the meantime, the OECD has released a report with further details on Amount B.
For guidance on Inland Revenue’s position, please refer to the following links:
Please reach out if you’d like to discuss this or any other questions.
