Transfer Pricing

There were no specific transfer pricing related measures in Budget 2024, although other tax developments (including Ireland’s commitment to the two-pillar solution and ongoing active engagement with the OECD on technical matters such as ‘Amount B’) will have overarching effects in the transfer pricing landscape in the years to come. Specifically, with the widening of the R&D tax credit regime from 25% to 30% tax credits as announced in Budget 2024, it will be critical for Groups to ensure they have the requisite substance in Ireland for any locally owned IP, and that transfer pricing policies commensurately reward any R&D functions undertaken.

More generally, transfer pricing remains an overarching area of focus and scrutiny from Irish as well as foreign tax authorities. This is reflected in taxpayers increasingly seeking tax certainty through Mutual Agreement Procedures (MAPs) and Advanced Pricing Agreements (APAs), and this trend is expected to continue in the coming period. Recent statistics from Irish Revenue show a greater use of MAP to ensure relief from double tax, indicative of taxpayers’ desire to have the Irish Competent Authority defend the transfer pricing arrangements in bilateral processes as well as the increased challenge in achieving unilateral correlative relief in Ireland for overseas assessments. Irish Revenue continue to promote APAs as a means to achieve certainty.

Taxpayers are advised to keep transfer pricing high on their agenda, given the increased compliance burden introduced for 2020 onwards as well as the significant increase in transfer pricing audit activity in Ireland. Groups should continue to closely monitor developments and ensure their compliance with the updated transfer pricing rules in Ireland. Timely and complete transfer pricing documentation with a detailed narrative on the value-chain and decision-making processes within Groups can help taxpayers achieve ‘tax-geared’ penalty protection under audit.