Transfer Pricing
What is the #1 tax risk identified by our clients in EY's global tax and controversy report (for the past 10+ years)?
Transfer Pricing
What is the standard tax credit rate for eligible R&D expenditure in NZ?
15%
What are the three primary branches of Corporate Tax at EY?
Tax Compliance, Financial Reporting, Tax Advisory
Are individual tax rates in New Zealand progressive, regressive, or fixed?
Progressive
Why is understanding a client’s business holistically important across tax teams?
To avoid solving one problem while creating another
What principle requires related parties to transact as if they were independent entities?
Arm's length principle
What is one common misconception that prevents companies from claiming R&D credits?
“We’re just doing Business As Usual”
List three ways in which taxpayers are "encouraged" (either incentivised or decentivised) to comply with tax
Fines, penalties, use of money interest, jail time, to continue operating in NZ, social responsibility
How do countries legislate varying tax treatments of multinational corporations?
Double Tax Agreements
Identify a possible conflicting interest between TP & R&D
The definition of R&D between TP and R&D does not align, so, TP team may understate R&D for a company or jurisdiction while R&D team has potentially inflated for an R&D claim. Conflicting information provided to authorities!
Name two ways practical ways related parties can shift profits.
Bogus prices on goods, uncommercial trade terms, service fees for unperformed services, for loans: bogus interest rates.
What legislation governs R&D tax credits in NZ?
Taxation (Research and Development Tax Credits) Act 2019 | Income Tax Act 2007 Subpart LY
What is a “permanent difference”?
A difference between tax and accounting treatment that never reverses
What are the three possible GST treatments of a good/service?
Exempt, 0%, 15%
Why is Grace always asking Nick about an R&D credit when preparing a tax return?
She needs to know the credit to input in the imputation credit account for the R&D credit.
A function analysis consists of an analysis of Functions, Assets and Risks. Which one is "technically" the most "important" and why?
Risks, because ability to undertake and manage associated risks indicates a higher contribution to the value chain.
What are the key criteria for R&D eligibility under NZ law?
There is a scientific/technological uncertainty, being attempted to resolve using a systematic approach
What is BEPS Pillar 2 concerned with?
Ensuring minimum global tax rates are met across jurisdictions
Explain the concept of a permanent establishment
Fixed place of business through which a non-resident carries out business in New Zealand, unless overridden by a double tax agreement.
You need to make a TP adjustment to a tax return which has already been filed? What do you do? What are the risks?
→ You can file a NOPA (formal - for material disputes), a Voluntary Disclosure or a s113 request.
→ Statute bar is extended. Opens you up for potential audit. Penalties & interest.
If transactions are found to be non-arm's length, what does the arm's length principle require? In addition, what is the potential consequence to related parties of the application of the arm's length principle to non-arm's length transactions?
Any profits earned due to uncommercial dealings, will be treated as being earned and taxed accordingly. This may result in double taxation, just because you underpaid one jurisdiction doesn't mean the other one will you a corresponding adjustment!
Why might a project that uses well-known principles be eligible for the RDTI?
Because it seeks to solve a technological uncertainty arising from unique constraints - not readily solvable without experimentation
What is the purpose of the corporate tax team? Explain their role in the EY Tax Function (List 3)
- Compliance with NZ tax law,
- Point of Contact for other tax teams,
- Risk management & identification
- Understanding clients' businesses holistically
What are some red flags that may indicate to a corporate tax team member that they should involve a TP colleague? List at least 3
Cross-border loans, large offshore management fees, high intercompany interest rates, any intercompany transactions that don't appear to be arms-length (or significantly inconsistent year-on-year)
List 3 ways (not already mentioned) that the our tax SSLs connect to deliver the best service to our clients.
endless (or not at all, if you are Paul Dunne)