11 August 2005
Ernst & Young brokers groundbreaking pricing agreements for two major NZ exporters
Ernst & Young New Zealand has brokered two groundbreaking advance pricing agreements (APAs) - one with Japan for a major
produce exporter and one with the United States for a leading New Zealand manufacturer. The bilateral agreements are
firsts for New Zealand with each jurisdiction, respectively.
In both cases, the agreements have enabled the New Zealand exporters to apply transfer pricing methods with the consent
of the relevant revenue authorities, giving the companies certainty in their tax risk management.
Ernst & Young?s National Director of Transfer Pricing, Leslie Prescott-Haar, says the APAs are significant for a number of
reasons.
?We believe the APA with Japan was negotiated in world-record time - it took less than twelve months from submitting the
application to formally reaching an agreement with Japan?s National Tax Agency. APA negotiations can take multiple years
in some cases,? says Ms Prescott-Haar.
The US agreement was also fast-tracked taking just 15 months to complete under the US Small Business APA Procedure.
Ms Prescott-Haar says an unusual feature of both agreements is their application for past and future years. ?APAs
usually apply to future years, for a defined period of time. However, we?ve successfully negotiated prior years under
both agreements, as well as several future years.?
Ms Prescott-Haar says an APA has benefits to all parties - for the company and its shareholders, the IRD and the revenue
authority in the overseas jurisdiction.
?This type of transfer pricing agreement has strong benefits for all parties. The company can minimise tax risk and
manage tax profile. It can be confident that the amount of tax it is paying on APA transactions won?t be challenged at a
future date.
?On the flipside, the revenue authorities have certainty around their tax take and don?t need to audit the company for
the duration of the agreement,? says Ms Prescott-Haar.
Ernst & Young?s transfer pricing specialists lead in this area and have been involved in approximately 65 percent of the APAs
agreed in New Zealand to date.
ENDS