For the first time the Irish transfer pricing regulations were presented in 2010 and later amended in 2020 to align with the Guidelines provided by the Organization for Economic Co-operation and Development (OECD). Currently, they are incorporated within the Taxes Consolidation Act.
Arm’s Length Principle
The arm’s length principle provides that pricing for all transactions –domestic or cross-border, performed between related parties must be equal to pricing for the same transacting or economic operations performed by two independent parties acting in a normal business environment.
Related Party Definition
In Ireland, two parties are considered associated if one controls the other, or they are both controlled by the same individual. In all circumstances, the controlled party must be a company. A person is said to control a corporation if they, and their principal family members (spouse, parent, child, or sibling), control it.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Ireland are provisioned in Article 9 of the Regulation, as follows:
- Comparable Uncontrolled Price Method (CUP)
- Resale Price Method (RPM)
- Cost Plus Method (CPM)
- Transactional Net Margin Method (TNMM)
- Profit Split Method (PSM)
The selection of the method is based on the most appropriate principle.
Comparability Analysis
In Ireland, the comparability analysis in transfer pricing is in line with the guidelines in Chapter III of the OECD Transfer Pricing Guidelines. This includes using an arm’s length range and applying statistical tools to determine fair pricing between related parties. To determine comparable transactions, the law provides neither states a preference for the local comparables, nor does allow the tax authority to use secret comparables.
Documentation Requirements
Transfer pricing documentation requirements in Ireland are based on the three-tiered approach set forth by the OECD. This requires multinational groups to:
- Master File;
- Local File, and
- Country-by-Country (CbC) report.
Master and Local File:
Since 2020, companies with consolidated annual revenue of more than €250 million have been required to prepare a Master File, and companies with over €50 million were required to prepare a Local File. The documentation needs to be prepared by the filing due date of the income tax return (generally 9 months after the end of the fiscal year) and submitted within 30 days if requested. The contents of the documentation must align with OECD Annexes I and II, meaning they need to provide information on group structure, business activities, transfer pricing methods, comparables, and financial information. Companies below the thresholds still need to maintain documentation that supports their transfer pricing practices.
Country-by-Country (CbC) Reporting:
CbC reporting, as per Irish law, is required for multinational groups that have an annual revenue of €750 million or more. This obligation falls on the Irish resident’s ultimate parent or an Irish-designated surrogate parent if the parent is outside of Ireland. Reports must be submitted within 12 months after the reporting year ends. If an entity fails to submit a report there are automatic penalties starting at €19,045, plus daily amounts for the length of the failure, of €2,535 if not resolved, unless it can show “reasonable cause”.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
An Advance Pricing Arrangement (APA) is an agreement between a taxpayer and the tax authority that sets out how transfer pricing will be done for future cross-border transactions. APAs help avoid disputes and double taxation. Irish law allows for two types of APAs, bilateral and multilateral.
Since 2016, the bilateral APA program has allowed for complex transfer pricing cases. Irish-resident companies or permanent establishments of foreign companies can apply, but only if there’s a tax treaty in place with the other country.
Mutual Agreement Program (MAP)
International tax disputes—like double taxation or transfer pricing issues—are solved through a formal MAP process under the double tax treaties. The taxpayer can request MAP even if a tax audit or legal case is ongoing or finished. Ireland aims to resolve cases within about 24 months, though complex transfer pricing cases may take closer to 30 months. If an agreement can’t be reached bilaterally, arbitration may be available under certain treaties or EU rules.
Penalties
Penalties are applied when taxpayers do not meet transfer pricing documentation requirements. For instance, in the case of reduced documentation, the penalty is levied at €4,000. For larger groups that must prepare a local or master file, the penalty is levied at €25,000, plus €100 for each day the failure continues.
Taxation at a Glance
In Ireland, the tax law is not codified, but instead, it consists of several separate laws, including among others the Taxes Consolidation Act, Value Added Tax Act, Stamp Duties Tax Act, etc. As well, considering that Ireland is a Common Law system, the case-law precedents from courts, impact the tax law.
The currency of Ireland is the Euro. The official name of the Irish tax authority is the Revenue Commissioners or the Irish Tax and Customs.
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 16% |
VAT | 23% |
Withholding tax on dividends to non-residents | 16% |
Withholding tax on interest to non-residents | 0/10% |
Withholding tax on royalties to non-residents | 10% |
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