Ireland

TP country guide

An update on current developments in Irish transfer pricing law by Gerard Feeney, head of transfer pricing, at Deloitte Ireland.

Market overview

As a small and open economy, Ireland has not been isolated or removed from international trends. The BEPS project means more transparency and more scrutiny for taxpayers in Ireland, and these changes have generated a lot more work for TP practices.

Companies need to be more vigilant than ever, as tax authorities have become more aggressive and more sophisticated in tackling avoidance. Transfer pricing has become a major focus as the international consensus has turned against avoidance. This has significantly increased the level of work in certain areas.

"There has been an increase in domestic litigation, as the Irish tax authorities have become more aggressive in pursuing people who they say haven't paid what they should," said Turlough Galvin, head of tax at Matheson. "That's traditional tax litigation. On the international side, we're seeing an increase in controversy between states and this means the number of TP disputes is rising."

Many practitioners see the Irish government as doing its best to meet international standards. "I think from a policy perspective, the Irish government has engaged very well with the BEPS agenda, and they've engaged with firms like ourselves on key issues," said Lorraine Griffin, the head of tax at Deloitte.

"Many Irish businesses are focused on export-led growth; foreign direct investment is also significant in Ireland and for many of the multinationals invested here, Ireland is a key part of their supply chain," said Griffin. "So BEPS is a key focus point for both Irish businesses and MNEs because they want to know what the new rules mean for their organisations."

Transfer pricing expertise has become a more important asset, as clients increasingly want advice and assistance on documentation and reports. The heightened scrutiny by tax authorities means companies are looking for specialist advice and support. This has led some firms to focus more on training TP specialists.

Although Ireland has seen a great deal of change due to international events, the domestic scene is mostly quiet as the country has a minority government. This means it is less likely for the market to be affected by a major domestic reform. On the international front, Ireland is susceptible to side effects from events in the US, the UK and the EU.

Many US firms see Ireland as a gateway to Europe and, with the UK leaving the EU, it is possible that the Irish economy will see more companies moving operations to its shores. Nevertheless, there is uncertainty for investors until the UK-EU negotiations produce a blueprint for what the deal may look like.

However, it is also the case that the Irish government will lose its major ally in the EU, as the UK has long opposed the EU's efforts to rein in its members, like Ireland, with low tax regimes. This period of uncertainty is still far from over.


Tax authorities

Tax Office/Revenue
85-93 Mt Street Lower
Grand Canal Dock
Dublin 2
Tel: +353 1890 333 425
Website: www.revenue.ie


Tax rates at a glance

(As of July 2017)

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