Transfer Pricing

What changes would you suggest be made to Ireland's transfer pricing rules to reduce the compliance burden on Irish companies? In your response we would encourage you to highlight examples of burden-reducing initiatives from other EU jurisdictions.

Contributor: Ian Clarke Partner, Head of Transfer Pricing, BDO


Making suggestions regarding changes to Ireland’s transfer pricing (“TP”) rules to reduce the compliance burden on Irish companies feels like an exercise in optimism at the present time. Only a few months ago, the Feedback Statement for Phase One of Reform of Ireland’s Taxation Regime for Interest included within it a proposal to extend TP rules to medium-sized enterprises. The logic for this extension was to act as a guardrail for the most high-risk transactions, currently outside the scope of the TP rules, in respect of any new interest deductibility rules and to better align Ireland with the TP rules applying in most EU Member States.

Although the documentation required for medium-sized enterprises under such a proposal would be simplified compared to the full requirements, such a development would clearly increase the compliance burden on entities with less capacity to deal with it. Accordingly, my first item on any wish list would be that no such extension of TP rules take place.

In the same defensive spirit I would also wish to ensure that Ireland’s threshold for preparing a TP Masterfile remain as it is - only applicable to Groups with total revenue of more than €250m, which is at the higher end of thresholds within EU countries (compared to €100m in Germany, for example). More optimistically, I would like to see Ireland spearhead a drive towards greater consistency (at a less onerous threshold level) in all EU territories.

A third suggestion for reducing the TP compliance burden would be for Ireland to consider unilaterally accepting the safe harbours developed as part of the OECD Pillar 1 Amount B package as applicable for qualifying Irish distributors. To recall, this would allow taxpayers that demonstrated they were routine distributors to be able to target an operating margin range consistent with OECD Amount B frameworks. At present, Irish transfer pricing regulations are focused solely on accepting the use of this safe harbour when it is applied in a limited number of counterparty countries.

Lastly, I would be hopeful that Ireland actively engages in the OECD revision of Chapter 7 of its TP Guidelines (which covers Intragroup Services). It goes without saying that services transactions are of enormous salience to most Irish companies dealing with transfer pricing, and there is much potential for reducing the broader compliance/administrative burden. Amongst these areas is the treatment of stock or share based compensations in the context of intra group services. This has been an area of considerable uncertainty for Irish taxpayers – (as discussed in greater detail in an October 2024 article in this journal) and the Irish tax administration should embrace the opportunity to bring further clarity and harmonisation in approach across OECD guided jurisdictions.

Content published in Finance Dublin Irish Tax Monitor.