On 18 February 2019, Department of Finance of Ireland released the public consultation document to update transfer pricing regime, with an effective date of 1 January 2020. The consultation looks for feedback on a number of aspects of existing transfer pricing regime. These include:
- OECD guidelines: Issues that may arise from the adoption of the 2017 OECD guidelines. It is intended that Irish transfer pricing legislation will be amended to include a direct reference to the 2017 OECD Transfer Pricing Guidelines.
- Grandfathered arrangements: Section 835D of the Taxes Consolidation Act provides that arrangements, the terms of which were agreed prior to 1 July 2010, are not subject to domestic transfer pricing legislation. The Coffey Review recommends that transfer pricing rules be applied to arrangements the terms of which were agreed before 1 July 2010. On foot of this recommendation, it is intended to remove this grandfathering provision with effect from 1 January 2020.
- SMEs: The Coffey Review recommends that ‘consideration should be given to extending transfer pricing rules to SMEs, having regard to whether the concomitant imposition of the administrative burden associated with keeping transfer pricing documentation on SMEs would be proportional to the risks of transfer mispricing occurring’. The logic for extending the transfer pricing rules to small and medium sized enterprises is to ensure that the rules are applied to all companies operating in Ireland. However, this must be balanced with the need to ensure that the onus of compliance is not overly burdensome and disproportionate to any risk of mispricing.
- Non-trading income: Issues that may arise upon application of transfer pricing to non-trading income and how these may be resolved.
- Capital transactions: Whether the current market value rules are sufficient so that capital transactions would remain outside the scope of the transfer pricing rules.
- Documentation: Issues arising from enhanced documentation requirements and in what circumstances would a reduced standard of documentation apply
- Branches: Transfer pricing rules are applied in respect of transactions between separate legal entities. The taxation of branch profits is dealt with by Section 25 of the Taxes Consolidation Act. The intention of amending Ireland’s transfer pricing rules is to implement OECD principles and ensure Ireland’s rules keep pace with the evolving international tax environment. In this light, it is appropriate to consider whether any change should be made to the taxation of branches in Irish law as part of overall transfer pricing reform. Ireland’s Corporation Tax Roadmap noted that the introduction of rules for the attribution of branch profits in Ireland in line with the Authorized OECD Approach would be considered as part of this consultation process.
The consultation period will run until 2 April 2019.
