The work of the OECD, the EU State aid investigations, public perception and the hunt for public funds by various Governments, mean that transfer pricing disputes will likely increase over the coming years. At any given time, multinational companies are now the subject of transfer pricing audits in numerous jurisdictions, with the potential for related transfer pricing adjustments. Taxpayers need to determine the appropriate allocation of their resources in prevention (developing and documenting transfer pricing policies, seeking advance pricing agreements ("APAs") and defence (dealing with transfer pricing audits globally). Country by country reporting and exchange of information provisions also mean that group arrangements cannot be dealt with in isolation and global tax departments need to develop a holistic and centralised view to transfer pricing policies adopted, and any transfer pricing adjustments agreed with tax authorities.
Irish taxpayers within multinational groups are increasingly involved in the new wave of transfer pricing disputes. In that respect, these taxpayers need to consider (i) their compliance with the Irish transfer pricing rules to avoid an Irish transfer pricing adjustment; and (ii) the ability to seek relief for, or avoid, adjustments by other tax authorities that ultimately impact on the Irish tax position.
Irish domestic transfer pricing rules
Ireland introduced formal transfer pricing rules in 2010 which, broadly, apply an arm's length standard to trading transactions between associated companies. The arm's length standard is to be construed in accordance with the OECD Transfer Pricing Guidelines. Ireland has not yet adopted the changes to the OECD Transfer Pricing Guidelines proposed by the report on Actions 8 - 10 (Transfer Pricing) of the OECD BEPS project, but it is expected that these will be incorporated into Irish law shortly.
The Irish Revenue Commissioners have also put in place the necessary structures to audit compliance with the Irish transfer pricing rules by establishing a standalone transfer pricing unit. Compliance with the transfer pricing rules was initially examined through relatively informal transfer pricing compliance reviews. However, the transfer pricing unit has now moved to conducting formal transfer pricing audits, with the potential for resulting Irish transfer pricing adjustments.
Irish taxpayers therefore need to review their intra-group arrangements to confirm the applicability...