bilateral Advance Pricing Agreement programme, tax


Ireland introduces bilateral Advance Pricing Agreement programme

On 23 June 2016, Irish Revenue published the Bilateral Advance Pricing Agreement Guidelines (‘the Guidelines’) relating to the operation of Ireland’s Advance Pricing Agreement (‘APA’) programme.

The formal bilateral APA programme is effective for applications received on or after 1 July 2016.

Summary of the Guidelines

Ireland’s bilateral APA programme is effective from 1 July 2016 and applies to bilateral APA applications made to Irish Revenue on or after this date. As such, the Guidelines do not apply with respect to:

  • Bilateral APAs which have been signed prior to 1 July 2016
  • Formal bilateral APA applications that have been submitted to Irish Revenue before 1 July 2016 (but in respect of which an APA has not been concluded as of 1 July 2016) and
  • Unilateral APAs (i.e. an agreement solely between the taxpayer and Revenue and not involving another competent authority). A separate, existing process applies for requests for opinions and confirmations outside of this new regime.

The programme applies to transfer pricing issues (including the attribution of profits to a permanent establishment, or ‘PE’) and is conducted within the legal framework of the double tax treaty that Ireland has entered into with the other jurisdiction concerned. An application may be made by a company that is tax resident in Ireland for the purpose of the relevant double tax treaty and also by a PE in Ireland of a non-resident company in accordance with the provisions of the relevant treaty.

The bilateral APA programme is intended to apply in respect of a transaction(s) where the transfer pricing issues involved are complex (e.g. there is significant doubt over the appropriate application of the arm’s length principle or where there would otherwise be a high likelihood of double taxation arising).

Where the transfer pricing issues involve more than two tax jurisdictions, of which

Ireland is one, Revenue will consider entering into a series of bilateral APAs as a way of dealing with such multilateral situations.

The bilateral APA programme is voluntary. Taxpayers can choose whether or not to enter into it. 

Suitable cases

An application may be made by a taxpayer for an APA in respect of the following:

  • Transactions between separate business enterprises and
  • Transactions between parts of the same business enterprise operating in different countries (e.g. between a head office and a PE or between two separate PEs), subject to the provisions of the relevant double tax treaty.

Term and roll-back

An APA will be granted in respect of a specific fixed period of time, typically between three and five years (excluding any roll-back years). Irish Revenue are willing to consider other fixed periods subject to the agreement of the other tax administration.

In accordance with the OECD’s Base Erosion and Profit Shifting (‘BEPS’) Action 14,Making Dispute Resolution Mechanisms More Effective”, Ireland will provide for the roll-back of APAs in appropriate 

The APA process

Part 4 of the Guidelines outline the distinct stages of the APA process:

  1. The pre-filing stage, where contact can be made with Irish Revenue on an informal basis to discuss the potential APA application. A pre-filing meeting is encouraged to discuss the case. In exceptional cases, Irish Revenue are prepared to consider pre-filing meetings on an anonymous basis
  2. The formal APA application stage, where certain information must be provided as part of the process, which is outlined in an appendix to the Guidelines and includes:
  • A cover letter
  • An executive summary
  • Company background
  • An industry analysis
  • An overview of covered transactions
  •  A functional and economic analysis
  • Financial information
  • Legal agreements and
  • Details of any other tax authority audit enquiries relevant to the application

3.    Evaluation of the APA application by Irish Revenue and negotiation of the APA with the other competent authority

4.    Formal agreement

5.    An annual reporting requirement, where an annual report must be filed with Irish Revenue, which includes information such as:

  •  A statement of whether the terms and conditions of the APA have been complied with
  • A statement of whether any critical assumptions underlying the transfer pricing methodology remain valid
  • Financial data for the reporting period and a comparison to the target arm’s length result agreed in the APA
  • Details of any adjustments made to stay within the arm’s length range and
  • Any other information that may have a material impact on the APA.

Wherever possible, Irish Revenue have committed to concluding a bilateral APA, once the formal application is received, within a 24-month timeframe.


With the increasing scrutiny and audit of transfer pricing activities by tax authorities worldwide, the formalisation of a bilateral APA programme is a welcome development for Irish taxpayers.

The purpose of an APA is to prevent disputes between a tax administration and the taxpayer with respect to the covered transactions and to prevent the risk of double taxation. It provides certainty about the selected transfer pricing methodologies and may mitigate audit exposure with regard to major transfer pricing issues. Within the APA framework, tax administrations and taxpayers cooperate with each other in a non-adversarial environment.

Even more important is the fact that a bilateral APA provides certainty to taxpayers that the covered transfer pricing issues will not be subject to audit adjustments by the tax authorities of either country taking part in the APA, provided of course that the terms and conditions are satisfied.

Overall, we view this as a very positive development for Irish businesses, which are dealing with an increasingly challenging international tax environment where transfer pricing is very much a ‘hot topic’ attracting a significant focus by tax authorities globally. 

For taxpayers contemplating a bilateral APA, it should be noted that as a result of changes to transfer pricing documentation resulting from BEPS Action 13, “Transfer Pricing Documentation and Country-by-Country Reporting”, will mean that such arrangements may need to be disclosed in the masterfile and relevant local file. From 1 January 2017, EU Council Directive (EU) 2015/2376 on the mandatory automatic exchange of information will apply and Irish Revenue will be obliged to automatically exchange certain information in relation to APAs with other EU Member States and to inform the European Commission of that information. In addition, certain basic information will have to be provided in relation to APAs with non-EU jurisdictions. Taxpayers will need to consider these developments when considering their APA strategy.

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