Transfer pricing in Ireland

Global tax authorities are increasingly scrutinising intercompany transactions to ensure compliance with the arm’s length principle and prevent tax avoidance. Non-compliance with transfer pricing can expose businesses to significant risks, including tax adjustments, penalties and reputational damage.

Revenue’s focus on transfer pricing in Ireland reflects these global trends, creating a challenging environment for businesses to navigate. At Forvis Mazars, our dedicated transfer pricing team provides tailored, commercially focused advice to help you stay compliant while optimising your tax position.

Overview of transfer pricing in Ireland

Transfer pricing refers to the pricing of transactions between associated parties. Under Irish legislation and the OECD Transfer Pricing Guidelines, these prices must align with those that would be agreed upon by independent parties operating at arm’s length.

Although certain exemptions exist, Irish legislation imposes significant documentation and reporting obligations and penalties for non-compliance can be severe.

Key features of transfer pricing in Ireland

• Alignment with OECD guidelines: Ireland’s transfer pricing framework follows global best practice, applying to trading and non-trading intercompany transactions.
• Branch operations: Since 1 January 2022, Irish branches of foreign companies are subject to the Authorised OECD Approach (AOA) for attributing branch profits.
• Exemptions: SMEs and specific non-trading domestic transactions may qualify for exemptions, but eligibility requires detailed analysis to avoid errors.
• Documentation requirements: Robust transfer pricing documentation is mandatory, following the Master File and Local File models prescribed by the OECD.

Transfer pricing documentation requirements

Under Irish law, taxpayers must maintain documentation demonstrating that their income/losses are computed by applying transfer pricing rules. Failure to do so is generally deemed "careless" conduct and any resulting adjustments are likely to incur penalties and interest.

• Local/Country File
  Multinational enterprises (MNEs) that are not classified as SMEs and have consolidated global revenue of €50m or more during the chargeable period must prepare a Local File in accordance with Annex II of Chapter V of the 2017 OECD Guidelines.
  
  Alternatively, a consolidated Country File may be prepared for all Irish entities or branches within the group.
  
  The Local/ Country File should include:
  • A detailed account of intra-group transactions.
  • An analysis of functions performed, assets employed and risks assumed in these transactions.
  • Economic and benchmarking analyses, including an industry overview.

The purpose of the Local/Country File is to demonstrate to tax authorities that all material intra-group transactions comply with the arm’s length principle.

• Master File
  MNE groups that are not SMEs and have consolidated global revenue of €250m or more during the chargeable period must also prepare a Master File in accordance with Annex I of Chapter V of the 2017 OECD Guidelines. 
  
  The Master File provides a high-level overview of the group’s operations, including:
  • Organisational structure and business activities.
  • Intangible assets and intercompany financial arrangements.
  • Financial and tax positions of the group.

Its primary goal is to help tax authorities assess potential transfer pricing risks in specific jurisdictions.

• Country-by-Country Reporting (CbCR)
  Country-by-country reporting is mandatory for MNE groups with consolidated turnover of €750m or more.

Deadlines
Both the Master File and Local/Country File must be prepared no later than the filing deadline for the tax return for the relevant chargeable period.

Risks of non-compliance

Failing to maintain or provide documentation can result in penalties ranging from €4,000 to €25,000, with additional daily penalties for continued non-compliance.

Transfer pricing adjustments may also incur interest of 0.0219% per day and tax-geared penalties of up to 100%, depending on the nature of non-compliance.

Areas of focus

To ensure compliance and mitigate risks, businesses should, in particular, consider areas such as:

• Limited-risk distributor arrangements and contract-based services
  Arrangements like contract R&D setups or limited-risk distributors may face scrutiny, especially if significant people functions and risk control activities are located in Ireland.
• Persistent losses for low-risk entities
  Repeated losses reported by entities designated as “low-risk” can raise red flags, potentially prompting deeper investigations by tax authorities.
• Cross-border financing transactions
  When an Irish entity is the borrower, ensuring the interest rate aligns with the arm’s length principle is critical and sufficient debt capacity must be demonstrated.
• Intellectual Property (IP) transactions
  Transactions involving IP are particularly sensitive due to complex valuation challenges and their significant tax implications.
• Business restructuring or model changes
  Changes to existing transfer pricing models or restructurings can attract attention. If a previously applied transfer pricing method is no longer suitable due to business evolution, it should be reevaluated and adjusted accordingly. 

How Forvis Mazars can help

Our transfer pricing specialists combine local expertise with international experience to deliver solutions tailored to your business needs.

Our transfer pricing services include: 

• Advisory & planning
  • Risk assessments and mitigation strategies.
  • DEMPE and value chain analysis.
  • Transfer pricing policy design and year-end adjustments.
  • Review of inter-company agreements.
     
•  Documentation & compliance
  • Preparation of Local/Country Files, Master Files, CbCR documentation and benchmarking studies.
  • Updates to existing documentation and strategic implementation of transfer pricing policies.
     
• Dispute avoidance & resolution
  • Support during transfer pricing compliance reviews, audit and interventions
  • Assistance with appeals, Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAPs). 

Contact us

Forvis Mazars’ transfer pricing team is ready to help you navigate the complexities of Irish and international transfer pricing regulations. Contact us today to ensure compliance and optimise your tax position.

International Transfer Pricing Rules

Forvis Mazars Transfer Pricing Rules – compare and contrast local country transfer pricing requirements across jurisdictions with our international transfer pricing tool.

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