Blog

By Young Jin Kim & Bart de Gouw

It is widely accepted that cross-border related-party debt can be used by multinational enterprises (MNEs) to shift profits out of a country. In the New Zealand context this led to the introduction of the Restricted Transfer Pricing (RTP) rules and the requirement to disclose inbound cross-border intercompany loans with a value of more than NZD10M to Inland Revenue in the BEPS Disclosure Form (this disclosure requirement has since been amended effective from the 2025 income year with taxpayers just required to hold a copy of the necessary information).

In recent years, the International Revenue Strategy (IRS) team at Inland Revenue has observed considerable behavioural change by foreign-owned MNEs with the introduction of additional equity and/or reducing related-party debt financing. This behavioural change has been attributed to the introduction of the RTP rules and a greater focus on financing by the Inland Revenue (via targeted campaigns, risk reviews and audits).

The past five years has seen a highly volatile interest rate environment, with historic lows in the Official Cash Rate in the 2020 and 2021 years, a rapid increase in 2022 and 2023, and a declining rate since the middle of 2024.  This level of volatility has meant that taxpayers should have been regularly reviewing intercompany financing arrangements to ensure that the behaviour of the parties to the loans, the terms and conditions of loans, and the interest rate have all remained arm’s length.  With the increases in the interest rates applying to the most recently filed 2023 and 2024 tax returns coupled with the Inland Revenue stepping up its audit activity more generally, we are expecting intercompany loans and financing to become a key area of focus for Inland Revenue.  This is starting to come to fruition with the number of risk reviews and audits focusing on intercompany financing increasing.

Risk assessment – Are you a green light or red light?

Now is an opportune time for taxpayers to reflect on their intercompany loans and key risk areas that could be challenged by Inland Revenue. To help with this, we have summarised 9 risk factors when it comes to intercompany loans.

1. The loan is over NZD10m at any time during the income year. RTP rules will apply to the loan and an analysis of the rules will be necessary, which can lead to material denial of interest deductibility as the borrowers’ credit rating may be adjusted and certain loan terms and conditions disregarded.
2. No documented loan terms. Loan agreements are important – this will be the starting point for any Inland Revenue review. In the absence of a valid agreement, Inland Revenue may seek to imply (unfavourable) terms and any pricing analysis conducted to support the interest rate will not have strong basis.
3. Loan agreements that do not clearly state what the arrangement is and what the key purpose of the funds advanced is.
4. The arrangement is non-commercial or contains ‘exotic’ features such as subordination, interest deferral of more than 12 months, or has a term of more than five years. Under the RTP rules, certain exotic terms cannot be priced into the interest rate.
5. Using a fixed interest rate for a revolving credit facility loan (that can be drawn down and repaid by the borrower) or a floating interest rate for a fixed term loan (the reset of an interest rate on a fixed term loan is likely a trigger point requiring a retesting the application of the RTP rules).
6. The loan has been extended, renegotiated, or renewed in the past year. This could make a big difference to the deductible level of interest as the interest rate environments change very quickly and these events also require retesting of the application of the RTP rules.
7. Has the loan been reset at a higher interest rate?  Is this what a third-party borrower would do, i.e. is the behaviour of the parties demonstrably arm’s length?
8. Does the borrower have a high debt percentage?  Greater than 40% is considered high risk for borrowers with a cross border related party borrowing of more than NZD10m.  Similarly, borrowing from related parties in low tax jurisdictions (<15% tax rate) is also a risk factor as set out in the RTP rules.
9. Be mindful of interest gross up clauses – any additional interest paid under a gross-up clause also needs to be arm’s length.

Update to Inland Revenue’s administrative guidance on small value loans

Inland Revenue annually publishes an administrative guidance for small value loans (i.e., for cross-border associated party loans for up to NZD10M principal). This administrative guidance may be applied to cross-border associated party loans.

Inland Revenue has historically provided an interest rate margin (over a relevant base indicator) that it considers to be broadly indicative of an arm’s length rate, in the absence of a readily available market rate for a debt instrument with similar terms and risk characteristics.  The most recent change to the interest margin has also introduced (without explanation or consultation) a change in approach to make the interest rate margin backward looking only and in our view, reduces the practical application of this otherwise widely used administrative guidance.  The current interest rate margin in the guidance is 250 basis points over the relevant base rate and applies for the period 1 July 2024 to 30 June 2025. There is now no equivalent guidance for interest rates for the year to 30 June 2026.  We will continue to provide updates on any developments on the administrative guidance.

Next steps

If any of the above risk factors concern you please contact your usual Deloitte advisor or one of our award winning transfer pricing team to help navigate the issues.

Transformational trends shaping healthcare in the region

Across Latin America, several powerful trends are reshaping the delivery of care. Three forces in particular stand out as critical drivers of change.

1. Telehealth 2.0: from pandemic response to integrated care

The adoption of telehealth across Latin America has been remarkable. What began as a necessary response to the pandemic is now evolving into a permanent and integrated part of the healthcare ecosystem. The telehealth market in the region is projected to exceed US $22 billion by 2030, signalling a permanent shift in how patients and providers interact.

This move toward “Telehealth 2.0” creates hybrid workflows that blend virtual and in-person services. Brazil is at the forefront, with a strong legal framework supporting telemedicine and e-prescriptions. However, rapid growth presents a challenge: how do we ensure the quality and consistency of care when it’s delivered virtually, across countless individual encounters? Preventing errors across settings is a top priority for health leaders.

2. Workforce disequilibrium: the clinician shortage and burnout crisis

It is no secret that Latin America faces a significant shortage of healthcare workers. The World Health Organization projects a 10 million worker shortfall globally by 2030, a gap that is felt acutely in our region. In countries like Brazil, Argentina, and Colombia, the nurse-to-physician ratio is well below the OECD average, placing great strain on existing staff.

This disequilibrium is not just about numbers; it’s about skill distribution and burnout. Experienced specialists are often concentrated in urban centers, leaving primary care and rural facilities to rely on less experienced staff. For clinicians everywhere, the cognitive load is immense, leading to high rates of burnout and staff turnover—a costly problem for any health system.

3. Chronic diseases and antimicrobial resistance

Like many regions, Latin America is grappling with a rising tide of non-communicable diseases (NCDs). Chronic conditions like diabetes and hypertension now represent a major challenge, accounting for a significant portion of healthcare expenditure. And antimicrobial resistance (AMR) has become a critical public health threat, with resistance rates for certain bacteria climbing to alarming levels in countries like Brazil.

This dual pressure is forcing hospital leaders to find new ways to manage resources effectively. With budgets under strain, there is a clear need for data-driven stewardship. The challenge is to optimize treatment and control costs without compromising patient outcomes, a goal that requires deep insight into clinical practice patterns.

Introducing UpToDate Enterprise Edition

We’re delighted to officially launch UpToDate® Enterprise Edition in Latin America to help address these challenges. UpToDate Enterprise Edition is more than an information resource; it’s a strategic tool designed to help healthcare organizations navigate these complex trends. It empowers both clinical and non-clinical users with the evidence and insights needed to build a more efficient, effective, and sustainable health system.

1. AI-enhanced search for faster, more confident decisions

For clinicians working in fast-paced environments getting to the right answer quickly is critical. UpToDate Enterprise Edition features a powerful, AI-enhanced search that understands natural language. A doctor can ask a multi-faceted question and receive a precise, evidence-based answer in seconds.

This capability helps standardize care quality across all settings by giving every clinician access to the same trusted expertise. By reducing the time spent searching for information, it also helps to lessen the cognitive burden on our clinical workforce, improving confidence and reducing the risk of burnout.

2. Advanced analytics for data-driven leadership

While clinicians need answers, hospital executives need data to make strategic decisions. The analytics portal in UpToDate Enterprise Edition provides leaders with a system-wide view of clinical activity. You can identify trends in drug and condition searches, spot knowledge gaps among staff, and benchmark your organization’s patterns against others.

For example, a hospital director can use the portal to see which antibiotics are most frequently researched, providing data to support an antimicrobial stewardship program. Or identify areas where junior staff are seeking guidance most often, allowing for targeted training and mentorship. These insights turn clinical usage data into actionable intelligence for improving operational efficiency, managing costs, and supporting quality and compliance initiatives.

3. A trusted partner in a new era of healthcare

For over 30 years, UpToDate has been a trusted partner to the global medical community. UpToDate Enterprise Edition extends this legacy with tools designed for the interconnected nature of modern healthcare, including our new generative AI functionality UpToDate Expert AI. Organizations with Enterprise Edition can test our GenAI interface through our AI Labs (limited to 5 users and non-point of care use).

With UpToDate Enterprise Edition, health systems gain a partner that helps them deliver better care today while building a sustainable and data-driven foundation for the future.

See UpToDate Enterprise Edition in action

UpToDate Enterprise Edition offers capabilities that address our region’s most pressing challenges. It’s a solution designed to connect care teams, optimize operations, and elevate the quality of care across the diverse environments that define Latin America.

If you’d like to see how UpToDate Enterprise Edition can support your organization, we invite you to contact us to schedule a demo.