The transfer pricing regulations will be effective for tax years beginning on or after 1 January 2011.

Summary: Ireland’s transfer pricing legislation will be effective for tax years beginning on or after 1 January 2011. The rules are not expected to cause undue concern as the administrative burden is minimal and there exists generous grandfathering provisions in relation to existing transactions.

What are the implications of Ireland’s transfer pricing legislation?

To a large extent, the Irish transfer pricing rules codify and clarify existing arm’s length provisions in the Irish Tax Code and are consistent with the Associated Enterprise provisions under Article 9 of most Irish tax treaties.

In the Irish Revenue’s own commentary following the Finance Bill — under a section entitled, “Why introduce general transfer pricing legislation now?” Reasons why:

• Protect the Irish tax base
• Remove uncertainty regarding the application of internationally accepted transfer pricing standards in Ireland
• Align Ireland with best international practice by formally adopting the OECD Transfer Pricing Guidelines
• Position Ireland better to intervene on behalf of companies where other jurisdictions adopt transfer pricing positions that do not accord with the arm’s length principle
• Enhance Ireland’s capacity to influence the direction of future developments in relation to transfer pricing in international taxation

Key features of the new Irish transfer pricing regime The regulations will be effective for tax years beginning on or after 1 January 2011. The regulations will apply to any “arrangement” between associated enterprises involving goods, services, money or intangible assets, but only where those transactions meet the definition of being trading transactions for one or both of the parties. The regulations will apply where trading receipts are understated or trading expenses are overstated. Grandfathering provisions will apply generally to all existing intercompany transactions where the terms are agreed prior to 1 July 2010; new arrangements entered into after this time will be within the scope of the new rules. To establish an arm’s length price, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations will be adopted. Records will need to be kept sufficient to support the arm’s length nature of the price, but no incremental transfer pricing documentation from an Irish-specific perspective need be prepared if there is documentation to support the pricing prepared from the other side of the transaction. It is to be expected that transfer pricing documentation will not have to be prepared contemporaneously with the filing of the Irish tax return but need only be available upon request. The rules will apply to domestic Irish intercompany transactions. There are exemptions from the rules for small and medium-sized enterprises, specifically companies with fewer than 250 employees and either revenue of less than €50 million or assets of less than €43 million. Auditing of transfer pricing cases will be restricted to a small number of people designated by the Irish Revenue commissioners. There is a mechanism to eliminate double taxation in domestic transactions.

Will transfer pricing rules enhance Ireland’s international transactions?

The rules as they are designed to come into effect should not cause undue concern for multinational companies already doing business in Ireland. This is for two main reasons:

1. First, the incremental administrative burden that is placed on companies in terms of the requirement to have transfer pricing documentation in place may in practice be minimal for companies that are already used to dealing with transfer pricing from the other side of the transaction.
2. Second, there are generous grandfathering provisions in relation to existing transactions. In the short term, companies doing business in Ireland and trading with related parties overseas will need to ensure they have taken stock of all their intercompany transactions and assess how (if it all) they may be impacted by the new rules. They should also ensure they have the necessary support in place to avail themselves of the grandfathering provisions.