Transfer pricing in Ireland is established between subsidiaries, affiliate companies or those that are commonly controlled, and it determines the amount that one division will charge the other for the provided goods and services.
The transfer pricing rules in Ireland are established by the Transfer Pricing (TP) guidance and the Tax and Duty Manual (TDM) issued by the Irish Revenue Commissioners, among other rules and regulations such as the Taxes Consolidation Act and the Finance Act.
Transfer pricing regulations were first introduced in Ireland in 2010. Our lawyers in Ireland answer some common questions in this article, however, they can respond to more in-depth inquiries if you schedule an appointment.
What are the transfer pricing methods in Ireland?
As a general rule, companies in Ireland are subject to the 2017 OECD Transfer Pricing Guidelines in most cases. This is due to the fact that the laws governing transfer pricing in Ireland stipulate that consistency should be kept with the OECD rules (as far as practicable). Also, there is no preferred transfer methodology to be used, As long as it is appropriate for the circumstances of the business and the general OECD principles.
The possible options are:
- Comparable uncontrolled price: this is one of the traditional transaction methods which compares the price of the services transferred in a controlled transaction to the price of the services transferred in a comparable uncontrolled transaction;
- Resale price: based on the release price of the product brought from an associated company, later sold to an independent party;
- Cost-plus: when following the transfer pricing rules in Ireland, this is another traditional transaction method which analyses the controlled transaction between a purchaser and an associated supplier; commonly used with semi-finished goods;
- Transactional net margin: assesses the net profit against an appropriate base (which can be sales or assets) resulting from a controlled transaction;
- Transactional profit split: for the purpose of transfer pricing in Ireland, this method is based on outlining the manner in which profits and losses are divided within independent companies in comparable transactions.
When low value intra group services are performed by companies within a multinational group for other companies within the same group, supporting documentation is needed:
- a description if the provided/received services;
- the identity of the provider and the receiver;
- motives for considering the services low value ones;
- the rationale for providing the services and the description of the benefits provided by each type of service;
- written contracts for the provision of the services;
- a confirmation of the applied markup.
Other documents may be needed. Our lawyers in Ireland can give you more details about these required documents as part of the transfer pricing rules in Ireland.
As far as the filing requirements are concerned, valid transfer pricing documentation should include records that justify and support the pricing.
Are there exclusions from the rules for transfer pricing in Ireland?
A number of domestic transactions are subject to anti-avoidance provisions and they may be excluded.
Some of the conditions that need to be met in order to apply the exclusion from the rules for transfer pricing in Ireland include:
- the supplier and the buyer must be qualifying relevant persons;
- the arrangement is not part of a scheme with another party which is not considered a relevant person;
- the arrangement is not made only to obtain a tax advantage.
Our tax lawyers in Ireland can also give you details about the rules for charging the profits or gains of the supplier or buyer derived from the relevant activities.
Transfer pricing in Ireland is an accounting practice used in case of subsidiaries or affiliates. According to the Central Statistics Office, the number of foreign-owned multinational companies has risen in recent years:
- in 2018, 66.2% of the total gross value added was derived from foreign-owned enterprises;
- although they have a significant contribution to the Irish business economy, these companies accounted for only 2.2% of the total number of companies in the country in 2018;
- in 2018, 2.1% of all services companies in Ireland were foreign-owned while 84.1% of the companies in the industry sector had the same status;
- also in 2018, foreign-owned companies in the country employed 25.7% of the working population.
Contact our tax lawyers for more information about the transfer pricing rules in Ireland and other information about taxation and accounting rules.