Ireland has introduced a formal bilateral advance pricing agreement (APA) programme which will be effective as of July 1 2016. It may now be preferable to initiate your bilateral APA in Ireland.
The Irish Revenue Commissioners (Revenue) published guidelines on June 23, which detail the scope, procedure and administrative requirements of the APA programme. These guidelines are in accordance with the best-practice recommendations of the BEPS Action 14 final report. The APA programme will replace Revenue's existing ad hoc approach to agreeing APAs and will provide increased certainty and transparency for taxpayers with multi-jurisdictional operations.
Scope of the APA Programme
The APA programme will apply to complex transfer pricing (TP) issues only, where the appropriate application of the arm's-length principle is in doubt or there is a significant risk of double taxation. Revenue list a number of factors which indicate the appropriateness of a particular matter for an APA, including:
significant doubt exists over the appropriate TP methodology or a bespoke TP methodology is being applied; the application of the TP methodology is complex or requires complex calculations; reliable comparables are not readily available and/or require significant and complex adjustments; and the transaction is real (i.e. not hypothetical) and is not expected to change throughout the duration of the APA. Accessing the APA Programme
A company's access to the APA programme is subject to the terms of the mutual agreement procedure (MAP) article of the relevant double tax treaty. An application for an APA may be made by a company which is tax resident in Ireland, or by a permanent establishment of a non-resident company, in respect of:
multi-jurisdictional transactions between separate business enterprises; or transactions between parts of the same business enterprise operating in different countries. Revenue will not enter into unilateral APAs. Where the relevant TP issues involve more than two tax jurisdictions, Revenue will consider entering into a series of bilateral APAs to deal with multilateral situations.
The APA Procedure
The APA process will typically take up to 24 months and will involve the following five stages:
Pre-filing: The pre-filing meeting will enable the parties to establish whether an APA is appropriate and will facilitate a discussion of the relevant issues (i.e. the transactions involved, proposed TP methodology, etc.). Formal...