Transfer Pricing Documentation - Are you prepared?

As part of the Finance Act 2019, there were significant updates to Irish transfer pricing legislation, commencing from 1 January 2020.

These updates included:

  • broadening the scope of Irish transfer pricing rules to include capital transactions, and non-trading transactions;
  • removing historic grandfathering provisions;
  • revised OECD guidance; and
  • update to the transfer pricing documentation provisions, being the most relevant.

Documentation requirements

Companies that are part of a Group with consolidated turnover in excess of €50m are required to prepare an Irish transfer pricing Local File, and if the group has turnover in excess of €250m they are also required to prepare a Masterfile.

Where a company prepares its Irish Local File by the time its tax return falls due, it should be able to avail of penalty protection on tax-geared transfer pricing penalties.

This means that for a company with a 31 December 2020 year end, they have until 23 September 2021 to prepare their documentation.

If Irish Revenue requests transfer pricing documentation from a company, and they are unable to provide it within 30 days, the company will be subject to penalties of  
€25,000 plus €100 per day until a Local File is provided.

Who do the rules apply to?

Irish transfer pricing rules apply to all Irish tax resident companies unless they are part of a Group that qualifies as a Small and Medium Sized- Enterprises (SME).
An SME is a consolidated Group (including both Irish and non-Irish companies) that has fewer than 250 employees, and has either less than €50m in turnover, or less than €43m in assets.

For the purposes of the SME test, a Group is considered to include Irish and non-Irish affiliates, parents and subsidiaries with >25% shareholding relationship, plus unaffiliated companies with common shareholders or the immediate family of common shareholders.

Please contact Kevin Doyle, Tax Partner and International Tax or Sam Stiles, Head of Transfer Pricing to find out more.

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