מחירי העברה: אירלנד- אוקטובר 2010

Ireland has joined the Transfer Pricing Race!

Earlier this year, the Irish Government introduced transfer pricing legislation endorsing the OECD Transfer Pricing Guidelines for Multinationals and Enterprises and Tax Administrations and the arm’s length principle. Ireland’s introduction of transfer pricing legislation was widely anticipated and brings the Irish tax regime into line with international norms in this area. The new regime will apply to domestic and international related-party arrangements.

The background to the introduction of Irish transfer pricing legislation is probably the number of transfer pricing adjustments raised by foreign tax authorities involving multinational groups with Irish operations, and the increased protectionism of tax authorities throughout the world.

It does not appear to be designed as a revenue raising measure. Rather, it may be viewed as a defensive measure intended to provide the Irish Revenue Commissioners with shiny new armour to defend the Irish tax base, while reassuring foreign tax authorities that Ireland is aligned with the international norm on transfer pricing.

There will be little change for most multinational groups with operations in Ireland as they have had to defend their transfer prices from foreign revenue authorities and the introduction of transfer pricing in Ireland does not fundamentally alter this position.

The new regime includes many features expected of a jurisdiction introducing transfer pricing for the first time, but the new legislation has two unique features that make it stand out from the international stage. The key features are:

• The new regime is confined to related-party dealings that are trading transactions (i.e. activities taxed at the 12.5% tax rate);
• The rules contain generous ‘grandfather’ provisions whereby arrangements entered into between related parties prior to 1 July 2010 are excluded from the transfer pricing rules.

The rules come into force from 1 January 2011 for all arrangements agreed on or after 1 July 2010.

They will only apply to large companies and to trading operations involving the supply and acquisition of goods, services, money or intangible assets. Income from passive activities such as rents, royalties and interest is excluded where such income is taxed at the 25% corporate tax rate.

For most cases of interest-free inter-company loans, the new rules should not apply. The measures provide for an upward adjustment where sales are understated or expenses overstated in transactions between associated entities.

The rules do not apply to small or mediumsized companies. The cut-off point is where there are fewer than 250 employees and either turnover is less than EUR 50 million or assets are less than EUR 43 million. Documentation will be required and must be prepared on a timely basis.

These measures are seen as broadly positive from an Irish viewpoint. They should give support to multinationals with Irish operations and to the Irish Revenue authorities in defending requests for transfer pricing adjustments that they consider to lie outside the normal OECD guidelines. Far from deterring multinationals for whom transfer pricing is a permanent and necessary business consideration, this new regime should enhance Ireland’s suitability as a location for international business.

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