On 7 September 2022, the Irish Revenue published an eBrief No. 166/22 on the attribution of profits to a branch. Accordingly, Tax and Duty Manual Part 02-02-04a has been issued to provide an overview and guidance in relation to the attribution of profits to a branch.
Section 28 of Finance Act 2021 inserted a new section 25A into the Taxes Consolidation Act 1997 to provide for the application of an OECD-developed mechanism (the “authorized OECD approach” or “AOA”) for the attribution of income to a branch or agency of a non-resident company operating in the State.
The AOA seeks to attribute to a permanent establishment (PE) and, in an Irish context, to a branch, the profits that it would have earned at arm’s length if it were a legally distinct and separate enterprise performing the same or similar functions under the same or similar conditions. Therefore, it incorporates separate entity and arm’s length principles.
The new section 25A applies for accounting periods commencing on or after 1 January 2022.
