Monday, February 8, 2010
Irish Minister for Finance Brian Lenihan has included in his 2010 Finance Bill measures to regulate transfer pricing, bringing it into line with 1995 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, and updated to include revisions such as the those on intangible assets.
Irelandís existing, but limited, armís length pricing rules for manufacturing trading will cease at the end of this year with the ending of manufacturing relief. The opportunity is being taken to introduce general transfer pricing legislation which will align Irelandís tax code in this area with the international norm.
The Department of Finance took care to ensure the regulations are regarded as light touch, but not so much that Ireland is stigmatized as a tax haven; it needed to address concerns expressed by the EU and the US that Ireland's low corporate tax rate of 12.5% and lack of substantial transfer pricing regulations were an enticement to shelter untaxed income there. The lack of a framework was said to be causing difficulties during negotiations of tax treaties.
Chartered Accountants Ireland described the rules as having the "features of best international practice" with the armís length principle, reliance on documentation, while not introducing significant additional compliance requirements for most businesses. Domestic companies with fewer than 250 employees and sales of less than EUR50m are exempt, and there is a lead in time for the rules to be implemented. The legislation becomes effective in 2011 in respect of transactions agreed on or after July 1, 2010.
Companies involved in transactions which are within the scope of the transfer pricing legislation are required to have records available that demonstrate compliance with the legislation.