Ireland

TP audit guide

An audit profile by Gerard Feeney, head of transfer pricing, and James Smyth, senior manager, transfer pricing, at Deloitte Ireland.

Market overview

This year, Ireland took additional steps towards an evolved transfer pricing regime. While initially slow in formally adopting transfer pricing into its legislative system, the country is slowly picking up the pace. TP legislation was first introduced in Ireland in 2010, later than many of its neighbours, and advisers have been busy keeping up with the new introductions this year.

Ireland introduced a formal bilateral advance pricing agreement (APA) programme which came into effect on July 1 2016. Although there previously was no formal regime, the Irish revenue did facilitate bilateral APAs.

"It's just another step in Ireland's progression around having a mature transfer pricing regime. It started off with introducing transfer pricing into our tax laws and the next step then after that was Irish revenue starting to take a number of formal transfer pricing reviews and transfer pricing audits and now there is a formalised transfer pricing audit team within Irish Revenue. Now the next step is the introduction of a formal bilateral APA regime," said Deloitte's head of TP, Gerard Feeney.

The programme was launched in response to the OECD BEPS project, which has remained a major topic around the globe. Ireland has actively been implementing BEPS action points with country-by-country reporting (CbCR) introduced this year, as well as Ireland's Knowledge Development Box, a patent box system in-line with the OECD's modified nexus approach.

The impact of BEPS is starting to show. As in many other jurisdictions, Irish taxpayers are becoming more aware of transfer pricing. "I think in terms of BEPS, people are becoming more and more focused on it at the moment because we are moving towards an implementation stage and there are quite a few changes coming down the line," said Sonya Mazor, partner at William Fry, Taxand Ireland.

As in various jurisdictions around the globe, Ireland has seen increasing aggression from the tax authorities and transfer pricing has become a key interest area.

"There's increased focus on transparency, with CbCR introduced by 2016 and more visibility for tax authorities on a multinational group's operations and also potentially with the EU's public CbCR getting the go-ahead," Feeney said.

The Irish economy is certainly picking up, with a continued interest of inward investment. Advisers reported Ireland is a hub for international groups and particularly US operations are using Ireland as a gateway to Europe. However, following the UK's vote to leave the EU, there is uncertainty on how it will affect the position of the Irish market.


Tax authorities

Revenue Commissioners
Large Cases Division
Ballaugh House
73-79 Mount Street Lower
Dublin 2
Tel: +353 1 702 3084
Email: largecasesdiv@revenue.ie
Website: www.revenue.ie


Tax rates at a glance

(As of April 2016)

Corporate income tax 12.5% (a)
Capital gains tax 33% (b)
Branch tax 12.5% (a)
 
Withholding tax
Dividends 20% (c)(d)
Interest 20% (d)(e)(f)
Royalties 20% (d)(f)(g)
 
Net operating losses (years)
Carryback 1
Carryforward Unlimited

  1. This rate applies to trading income and to certain dividends received from non-resident companies. A 25% rate applies to certain income and to certain activities.
  2. A 40% rate applies to disposals of certain life insurance policies.
  3. This withholding tax is imposed on dividends distributed subject to exceptions
  4. Applicable to both residents and non-residents.
  5. Interest paid by a company in the course of a trade or business to a company resident in another European Union (EU) member state or in a country with which Ireland has entered into a double tax treaty is exempt from withholding tax, subject to conditions. Bank deposit interest is subject to a 41% deposit interest retention tax (DIRT). DIRT exemptions apply to bank interest paid to non-residents and, subject to certain conditions, bank interest paid to Irish resident companies and pension funds.
  6. Ireland implemented the EU Interest and Royalties Directive, effective from January 1 2004.
  7. Under Irish domestic law, withholding tax on royalties applies only to certain patent royalties and to other payments regarded as "annual payments" under Irish law. The Irish Revenue has confirmed that withholding tax need not be deducted from royalties paid to non-residents with respect to foreign patents (subject to conditions).

Source: EY 2016 Worldwide Corporate Tax Guide


Firm contact details

Deloitte