Ireland Update

Transfer pricing developments in 2018

During 2018, there has been a number of developments in Ireland’s transfer pricing regime that companies need to be aware of. These developments arise mainly as a result of the OECD Base Erosion and Profit Shifting (“BEPS”) project.

Coffey Review - Tax Roadmap Transfer Pricing recommendations

In September 2017, the Irish Government published the Review of Ireland's Corporation Tax Code (“the Coffey Review”) undertaken by Mr Seamus Coffey, an independent expert. The Coffey Review was prepared in recognition of the changing international tax landscape and included various recommendations related to Ireland’s domestic transfer pricing regime.

In September 2018, the Department of Finance published Ireland's Corporation Tax Roadmap (“Tax Roadmap”) which outlines proposed amendments to Ireland’s transfer pricing regime arising from the Coffey Review. The Tax Roadmap highlights that Ireland is committed to ensure that its transfer pricing rules are effective in ensuring tax is paid where value is created. Accordingly, a public consultation will commence in early 2019 to allow stakeholder input into the proposed changes to Ireland’s transfer pricing legislation based on the Coffey Review. The aspects which may be subject to review and update in next year’s Finance Bill may include;

• Removal of “grandfathering” for transactions the terms of which were entered into before 1 July 2010.

• Removal of the SME exemption which allows certain companies to fall outside Ireland’s transfer pricing documentation requirement.

• Application of transfer pricing rules to non-trading and capital transactions.

• Aligning Ireland’s transfer pricing law to the latest version of the OECD Transfer Pricing Guidelines which were issued in July 2017 and include the principles in Action 8-10 of the BEPS project dealing with aligning transfer pricing outcomes where value is created and Action 13 enhanced transfer pricing documentation standards.

• Introduction of transfer pricing rules for the taxation of branches in Ireland in line with the Authorised OECD Approach (“AOA”).

Other aspects which may be dealt with in next year’s legislative changes include incorporating OECD guidance issued in 2018 relating to:

• The latest (and probably final) OECD discussion draft dealing with the application of the transactional profit split method which was issued in June 2018.

• Guidance for tax authorities dealing with hard to value intangibles issued in June 2018.

Both discussion drafts are intended to supplement the new 2017 OECD Transfer Pricing Guidelines and will be incorporated into the next consolidated update of the Guidelines.

The public consultation may also include consideration of whether any additional changes to Ireland’s tax code are needed to ensure transfer pricing rules are fully effective in ensuring tax is paid where value is created and do not facilitate the transfer of profits to jurisdictions other than where value-creating activity takes place.

Transfer Pricing Dispute Resolution

We are seeing an increasing focus from Irish Revenue on transfer pricing audits over the last number of years. Resources dedicated to audits are being increased in alignment with the general increase in tax disputes internationally. In this respect, Irish Revenue published guidelines in relation to the monitoring of compliance with the transfer pricing rules during 2018.

In May 2018, Irish Revenue released a Tax and Duty Manual - “Monitoring Compliance with Transfer Pricing Rules” - that contains information regarding the tax authorities’ approach to monitoring compliance with domestic transfer pricing law in Ireland. The manual outlines details regarding the two programs used to monitor compliance with Irish domestic transfer pricing law:

The Transfer Pricing Compliance Review program (“TPCR”)

The TPCR program allows authorized officers from the Irish Revenue to send out notifications to selected taxpayers inviting them to self-review their transfer pricing and report back within three months. The review will be for a specific accounting period and it should address

• The group structure;

• Details of transactions by type and associated companies involved;

• Pricing and transfer pricing method for each transaction or group of transactions;

• Functions, assets, and risks of the parties involved;

• List of documentation available or reviewed by the taxpayer; and

• The basis for establishing if the arm’s length standard has been satisfied.

In most circumstances, an existing transfer pricing study should suffice, as it is likely to include all the relevant points required.

The manual emphasizes that a TPCR is not a transfer pricing audit, and the information collated from the review is used by Irish Revenue in its risk assessment process for taxpayers. In certain circumstances, a case selected for a TPCR may be escalated to a formal audit. The manual cites two examples when this may occur: when the company declines to complete a self-review or when the output from the review and follow- up queries indicates that the arm’s length principle is not adhered to.

Transfer Pricing Audit Program

A separate transfer pricing audit team was constituted within Irish Revenue in the Large Cases Division (LCD) in 2015. Irish Revenue have a standard schedule of information normally requested upon the commencement of a formal transfer pricing audit, including:

• A corporate chart outlining the group structure and shareholdings of each group company;

• An organizational chart outlining the different functional areas, employee titles, and reporting lines;

• Details of relevant related-party transactions, including a brief description of each transaction, together with the name of each counterparty and a summary of the material terms and conditions of each transaction;

• A summary of the functions, assets, and risks of the relevant parties in relation to each related-party transaction or transaction class;

• The pricing structure and transfer pricing methodology used in relation to each related-party transaction or transaction class;

• Details of the basis on which it has been established that the arm’s length principle is satisfied for each transaction or transaction class identified; and

• A financial analysis supporting the conclusions reached on the arm’s length nature of each transaction or transaction class.

Typically, 30 days’ notice is given in the first audit letter to provide the information requested. Based on recent  experience, it is not uncommon for additional letters with further detailed queries to be issued by the tax auditors after the initial information request outlined above.


The manual issued by the Irish Revenue provides up-to-date clarifications regarding the compliance programs in operation in Ireland. Interestingly, the document issued may suggest that the Irish Revenue intends for the TPCR program and the transfer pricing audit program to work in tandem. Because the transfer pricing team within Irish Revenue have finite resources to undertake full transfer pricing audits, it may mean that the TPCR process will be used more frequently going forward to risk-assess potential cases for future audits.

In today’s environment, tax authorities have more information on a company’s operations and global value chain as the first country-by-country (CbC) reports were automatically exchanged between tax authorities in June 2018. In addition, many groups are now preparing their transfer pricing documentation to align with the Master File and Local File approach in the 2017 OECD Transfer Pricing Guidelines, which will contain enhanced information on the entire group. The additional information available to Irish Revenue on companies’ operations in Ireland will assist them in assessing companies for further scrutiny in the years ahead.

Guidelines on low-value intragroup services

In March 2018, Irish Revenue issued guidelines on a simplified approach to low-value intragroup services, indicating that they are prepared to accept a 5% mark-up on the relevant costs without requiring a formal benchmarking study. The guidelines set out that the services which constitute low-value intragroup services for purposes of the simplified regime exhibit the following features:

• They are of an administrative/routine nature, often consisting of back-office support services;

• They are supportive in nature and not part of the multinational group’s core business;

• They do not use or create unique and valuable intangible assets; and

• They do not involve significant risk for the service provider.

Based on the guidelines, there is no definitive list of low-value-adding services and, as such, the facts and circumstances must be considered on a case-by-case basis. Certain supporting documentation is required in order to set out that the simplified approach is appropriate in each case including a description of the services, the recipient’s/provider’s identity, a description of the benefits, information on the cost base, the contracts etc.


The publication of the guidance notes by Irish Revenue provides taxpayers with a level of support in terms of how to deal practically with related-party transactions that are routine in nature. While the guidance notes are drafted with reference to the 2010 version of the OECD Transfer Pricing Guidelines, this guidance should be read in conjunction with updated chapter VII of the 2017 OECD Transfer Pricing Guidelines which are expected to be formally adopted in Ireland by 2020.

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