Formal transfer pricing legislation was introduced in Ireland for the first time in 2010. The transfer pricing regime applies for accounting periods commencing on or after 1 January 2011, for transactions the terms of which were agreed on or after 1 July 2010.
Whilst Ireland's transfer pricing rules are therefore still relatively new, transfer pricing is becoming an increasing important issue to consider for multinationals operating in Ireland.
Broadly speaking, Ireland's transfer pricing rules require domestic and international transactions between associated persons undertaken in the course of trading activities to be entered into at arm's length. Where an arrangement between associated entities is made otherwise than at arm's length, an adjustment may be made to the Irish company profits. An adjustment is only made where income is understated or expenses are overstated. The transfer pricing legislation specifically provides that the transfer pricing rules should be construed in accordance with the 2010 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the 'OECD Guidelines').
The Irish tax authorities (the 'Revenue Commissioners') have publicly stated that they would prefer a collaborative approach to transfer pricing. In this context, in November 2012, the Revenue Commissioners announced that transfer pricing compliance reviews ('TPCRs') would form the cornerstone of monitoring compliance with Ireland's transfer pricing rules. To date the TPCR process has run quite smoothly and taxpayers see it as a good opportunity to assist the Revenue Commissioners in understanding the taxpayer's business outside the pressure of a formal tax audit.
In October 2014, the Irish Department of Finance published 'Competing in a Changing World: A Road Map for Ireland's Tax Competitiveness'. This publication followed a public consultation on Ireland's approach to the OECD base erosion and profit shifting ('BEPS') project. One of the key goals identified by the Department of Finance is the necessity for Ireland to increase its competent authority resources to defend transfer pricing disputes. The Irish authorities specifically acknowledge that international transfer pricing disputes are likely to increase in number over the coming years and that Ireland needs to be ready to defend its tax base. Accordingly, Ireland has pledged to strengthen the capabilities of its transfer pricing competent authority by assigning new resources to the Revenue Commissioners to meet this growing priority need.
[A] Legal Authority
The Irish transfer pricing legislation is contained in Part 35A of the Taxes Consolidation Act 1997 ('TCA').
[a] Circumstances in Which the Transfer Pricing Rules Apply
Ireland's transfer pricing rules apply in the following circumstances:
There must be an 'arrangement' involving the supply and acquisition of goods, services, money or intangible assets.1 The supplier and acquirer must be "associated" at the time of the supply and acquisition. The circumstances in which two persons are associated is explored in further detail below. The profits, gains or losses arising from the relevant activities are in respect of 'trading' activities.2 'Trading' is defined in Irish legislation as including 'every trade, manufacture, adventure or concern in the nature of a trade'. This is a key unique characteristic...