Transfer Pricing Update – Ireland Finance Act 2019

December 3, 2019

What has happened………

The Finance Act 2019 has introduced changes to the Irish transfer pricing rules, updating those originally enacted to Irish law in the Finance Act 2010.

These changes apply BEPS Action 13 which provides guidance for tax administrations in developing rules around documentation to be prepared by tax payers to demonstrate that the relevant transactions satisfy the arms-length principle. Action 13 has been incorporated into the 2017 OECD Transfer Pricing guidelines. The previous legislation offered flexibility in terms of the form of the documentation. This new set of rules is more prescriptive in the form and content of transfer pricing documentation, the main aim is to set common standards for clarity and transparency purposes.

What is being required

The legislation requires companies to document and describe the nature of certain related party transactions falling within the legislation. The aim is to increase the focus on the substance of transactions. It is important to consider and document whether independent parties “would have” entered into the particular related-party transactions in the first instance.

The new policy introduces a three tiered harmonised approach to documentation of the arms-length principle applying to related party transactions:

Local File (LF)

This is compulsory for groups with global revenues >€50M

It will contain details on the local entity and specifics relating to relevant related party transactions.

If prepared at group level the Irish subsidiary should obtain a copy and review for completeness.

Master File (MF)

This is compulsory for groups with global revenues >€250m

This is a global report containing information on the group as a whole

The MF must be readily available to all entities within the group for review, the Irish entity should satisfy itself that it is correctly recorded within the document.

Country by Country (CbC) Reporting

The ultimate parent or other nominated entity must file an annual report with the relevant tax authorities on behalf of group entities. This report must be filed within 12 months of the end of a fiscal period.

Where an Irish entity is not the reporting entity there is an annual requirement to notify the Irish revenue of who the reporting entity is. This filing must be done by the end of the financial year to which the report relates.

When this comes into effect

The rules come into existence for chargeable periods commencing on or after 1 January 2020.

Documentation is required to be prepared by, latest, the time the relevant tax return falls due. e.g. for a company with a fiscal year end 31 December 2020 it is expected that transfer pricing documentation would be in place by 23 September 2021.

For further information please contact our Corporate Services Team.