On 2 September 2019, the Irish Department of Finance issued a feedback statement outlining changes that will be made to the Irish transfer pricing rules with effect from 1 January 2020. Irish transfer pricing rules apply to certain transactions entered into by associated parties. The key changes to the Irish rules are summarised below:
the transfer pricing rules will apply to non-trading transactions, save for certain Irish-to-Irish non-trading transactions; grandfathering that existed for transactions agreed before 1 July 2010 will be removed; the transfer pricing rules will begin to apply to capital transactions where the market value of the asset exceeds 25 million; the transfer pricing legislation will expressly permit re-characterisation of transactions where parties acting at arm's length would not have entered such arrangements; the application of the transfer pricing legislation will be based on the substance of an arrangement where the substance is inconsistent with the form of the arrangement; the transfer pricing legislation will incorporate by reference the 2017 OECD Transfer Pricing Guidelines, the OECD Guidance issued in 2018 on Hard to Value Intangibles and the OECD Guidance issued in 2018 on the Transactional Profit Split Method; the documentation requirements will be updated so that master files and local files will have to be prepared (subject to certain financial thresholds) and an express timeline for the preparation of supporting documentation will be included in the legislation; and the transfer pricing rules will apply to medium-sized enterprises in respect of transactions where the consideration payable exceeds 1 million - commencement of this provision will be subject to a Ministerial Order. The changes that have been announced are broadly in line with what had already been signalled by the Irish Department of Finance (Finance).
The document that was issued (the Feedback Statement) was a response to a public consultation that had been held earlier this year. It includes draft legislative provisions that may be included in the Finance Bill 2019 to effect the announced changes. Finance has requested comments on the Feedback Statement at the earliest opportunity and no later than 13 September.
We have included additional detail on each of the proposed changes below.
Application of rules to non-trading transactions
The Irish transfer pricing rules are currently limited so that they only apply to...