Ireland: Guide To International Transfer Pricing

Last Updated: 17 February 2016
Article by Joe Duffy and Barry McGettrick

Formal transfer pricing legislation was introduced in Ireland for the first time in 2010. The transfer pricing regime applies for accounting periods commencing on or after 1 January 2011, for transactions the terms of which were agreed on or after 1 July 2010.

Whilst Ireland's transfer pricing rules are therefore still relatively new, transfer pricing is becoming an increasing important issue to consider for multinationals operating in Ireland.

Broadly speaking, Ireland's transfer pricing rules require domestic and international transactions between associated persons undertaken in the course of trading activities to be entered into at arm's length. Where an arrangement between associated entities is made otherwise than at arm's length, an adjustment may be made to the Irish company profits. An adjustment is only made where income is understated or expenses are overstated. The transfer pricing legislation specifically provides that the transfer pricing rules should be construed in accordance with the 2010 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the 'OECD Guidelines').

The Irish tax authorities (the 'Revenue Commissioners') have publicly stated that they would prefer a collaborative approach to transfer pricing. In this context, in November 2012, the Revenue Commissioners announced that transfer pricing compliance reviews ('TPCRs') would form the cornerstone of monitoring compliance with Ireland's transfer pricing rules. To date the TPCR process has run quite smoothly and taxpayers see it as a good opportunity to assist the Revenue Commissioners in understanding the taxpayer's business outside the pressure of a formal tax audit.

In October 2014, the Irish Department of Finance published 'Competing in a Changing World: A Road Map for Ireland's Tax Competitiveness'. This publication followed a public consultation on Ireland's approach to the OECD base erosion and profit shifting ('BEPS') project. One of the key goals identified by the Department of Finance is the necessity for Ireland to increase its competent authority resources to defend transfer pricing disputes. The Irish authorities specifically acknowledge that international transfer pricing disputes are likely to increase in number over the coming years and that Ireland needs to be ready to defend its tax base. Accordingly, Ireland has pledged to strengthen the capabilities of its transfer pricing competent authority by assigning new resources to the Revenue Commissioners to meet this growing priority need.


[A] Legal Authority

[1] Legislation

The Irish transfer pricing legislation is contained in Part 35A of the Taxes Consolidation Act 1997 ('TCA').

[a] Circumstances in Which the Transfer Pricing Rules Apply

Ireland's transfer pricing rules apply in the following circumstances:

  1. There must be an 'arrangement' involving the supply and acquisition of goods, services, money or intangible assets.1
  2. The supplier and acquirer must be "associated" at the time of the supply and acquisition. The circumstances in which two persons are associated is explored in further detail below.
  3. The profits, gains or losses arising from the relevant activities are in respect of 'trading' activities.2 'Trading' is defined in Irish legislation as including 'every trade, manufacture, adventure or concern in the nature of a trade'. This is a key unique characteristic of the Irish transfer pricing rules.
  4. For Irish capital gains tax purposes, transactions between connected persons are deemed to be otherwise than as a bargain at arm's length and are therefore deemed to be for a consideration equal to the market value.3

[b] Consequences of the Application of the Transfer Pricing Rules

The consequences of the application of the transfer pricing rules are as follows:

  1. Where an arrangement between associated entities is made otherwise than at arm's length, an adjustment may be made where the Irish company has understated income or overstated expenses. 'Arm's length amount' is defined as the amount of the consideration that independent parties would have agreed in relation to the arrangement had those independent parties entered into that arrangement.4
  2. The relevant person to which the transfer pricing rules apply must have available such records as may be reasonably required for the purpose of determining whether the trading profits have been computed on an arm's length basis in accordance with the transfer pricing rules.5

[c] Interpretation of the Irish Transfer Pricing Rules

Irish transfer pricing legislation specifically provides that the transfer pricing rules are to be construed in such a way as to ensure, as far as possible, consistency with the OECD Guidelines so far as they relate to trading transactions.6 Given that the OECD Guidelines are effectively incorporated into the Irish legislation, the TCA does not go into any detail about how to apply the arm's-length test, what transfer pricing methods to employ or what comparables can or should be utilized. The Irish transfer pricing legislation is primarily concerned with defining the extent of application of the legislation.

[d] Important Concepts

Some of the key concepts are:

[i] Arrangement

An 'arrangement' is defined broadly in section 835C TCA to mean 'any agreement or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable)'. It includes arrangements in respect of money.

[ii] Association

The Irish transfer pricing legislation only applies where parties to a transaction are 'associated'. The basic test for association is set out in section 835B TCA which states that two persons are associated where at the time of the making or imposition of the actual provision:

  1. one of the affected persons was directly or indirectly participating in the management, control or capital of the other; or
  2. the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.

This wording effectively mirrors the wording of the Associated Enterprises article7 of the OECD Model Tax Convention. The broad effect is that the arm's-length principle has to be applied to provisions between two persons where one of those persons controls the other person, or they are under common control by another person or persons.

[iii] Control

Control is an essential element of the test for 'association'. The legislation specifies at section 835A TCA that control is to be read in accordance with a general definition of control for tax purposes, which is set out in section 11 TCA.

(a) Company

In the case of a company, control is the ability of a person to direct that the affairs of the company are conducted in accordance with the wishes of that person. This ability may be evidenced by the person's holding of shares or possession of voting rights in the company or any other company or by the existence of any powers conferred by the articles of association or other document regulating the company or any other company.

A person will be treated as controlled by an individual if the individual together with relatives of that individual control it. For this purpose, relative means husband, wife, ancestor, lineal descendant, brother or sister.

(b) Partnership

In the case of a partnership, control is the right to a share of more than 50% of the assets, or of more than 50% of the income, of the partnership.

[iv] Trading

The Irish transfer pricing rules only applies to trading transactions. Irish legislation does not contain a useful definition of 'trade'. Generally, to be trading, the Irish company should be engaged in the key profit-making commercial activity and should have the necessary people resources in Ireland with the requisite skill and expertise to perform that activity.8 Whilst certain activities may be outsourced or subcontracted to third parties; the directors must be involved in managing the commercial activity and strategic direction of the company.

In the majority of cases, there will be little doubt about whether a company's activities constitute trading activities. Guidance as to what constitutes 'trading' is derived from case law and by reference to a set of rules known as the Badges of Trade. The Badges of Trade rules were drawn up in 1955 by the UK Royal Commission on the Taxation of Profits and Income and have been approved by Irish courts. The Badges of Trade, and matters to be considered in determining whether a particular activity constitutes a trade, include the following: (i) Subject matter; (ii) Length of ownership; (iii) Frequency of transactions; (iv) Supplementary work; (v) Circumstances for sale; and (vi) Motive for transaction. These issues have been considered extensively in the courts. In IRC v Livingston,9 the taxpayers acquired a cargo vessel and sold it at a profit and were held to be trading on the basis that even though it was an isolated transaction, substantial work was undertaken with a view to a subsequent disposal. In the UK High Court case of Noddy Subsidiary Rights Company Limited v CIR,10 a company was formed to exploit the name and image rights of a character from a children's book. It was held that, in certain circumstances, the exploitation of these rights could constitute a trade. In this case, considerable weight was placed in the evidence on the high degree of activity associated with trying to promote the brand in question, seeking out and evaluating licensees and dealing with third parties. In IRC v Fraser,11 the taxpayer bought and sold a large quantity of whiskey and was held to be trading on the basis that the whiskey acquired was more than he could personally use. In Leach v Pogson12, over the course of four years, the taxpayer set up and disposed of twenty-nine driving schools and was held to be trading.

The Revenue Commissioners have issued a guidance note on the classification of activities as trading which states that they may be prepared to express a view as to whether a particular transaction or operation amounts to a trade or will qualify for the 12.5% rate. In arriving at a decision, the Revenue Commissioners endorse the Noddy case referred to above and have stated that the key considerations in their view are:

  • Is there any commercial rationale for the type of situation proposed?
  • Is there any real value added in Ireland?
  • Are there employees in Ireland with sufficient levels of skills to indicate that the company is actively carrying on a trade?

The Revenue Commissioners have also published details of cases submitted and opinions issued in the period from December 2002 to December 2013 on the classification of activities as trading activities.13 The Revenue Commissioners have stated that opinions on the classification of activities as trading are arrived at with reference to the specific facts and circumstances of each case. The key issues in the decision-making process are the activity, authority and skill levels within the company.

[v] Domestic Transactions

The Irish transfer pricing rules and arm's-length test apply to domestic trading transactions and crossborder transactions alike.

[vi] Exemptions from the Transfer Pricing Rules

(a) Small- or Medium-Sized Enterprises Exemption

Arrangements concluded within small or medium sized enterprises ('SMEs') are excluded from the scope of Ireland's transfer pricing rules.

The definition of SME for the purpose of Irish transfer pricing legislation is closely based on the definition of enterprises which fall within the category of micro, small and medium-sized enterprises as defined in the Annex to the European Commission Recommendation of 6 May 2003.14

In order to qualify as an SME, the group must meet both the following conditions:

(1) it has fewer than 250 employees; and (2) either (or both) its turnover is less than EUR 50 million or its assets are less than EUR 43 million.

The thresholds are measured on the basis of the size of the group of which the enterprise forms a part, rather than the size of the Irish taxpayer enterprise itself. The European Commission definition specifies which other companies and entities must be taken into account to calculate size.

The exemption for SMEs is set out in section 835E TCA. Where the exemption applies, the enterprise is not subject to the Irish transfer pricing rules.

(b) Grandfathered Transactions

Arrangements which were agreed before 1 July 2010 and remain unchanged are not subject to Irish transfer pricing rules.15 The view of the Revenue Commissioners, although not published officially, is that for an arrangement to remain grandfathered the arrangement existing as at 1 July 2010 should be able to 'deliver the terms' of the ongoing arrangement. For example, a licence agreement entered into before 1 July 2010 which provides 'such arms' length rate as the parties shall determine' is unlikely to be grandfathered. However, a licence agreement entered into before 1 July 2010 which states the royalty to be '10% of sales' should be grandfathered.

The arrangements to be grandfathered need not be documented.

(c) Section 110 Securitization SPVs

Section 110 TCA contains a specific legislative requirement that the transactions entered into by a qualifying special purpose vehicle ('SPV') should be by way of bargain at arm's length except in respect of profit participating loan notes ('PPLs') issued by a qualifying company. Accordingly, certain transactions or arrangements entered into by section 110 TCA SPVs are exempt from Irish transfer pricing rules.

Interest paid on PPLs (i.e., interest which is dependent on a company's results)16 is generally reclassified as a distribution and is not tax deductible. For example, an Irish company (IreCo) borrows from a group finance company (FinCo) at an interest rate of Euribor plus 3% plus an amount equal to 2% of IreCo's pre-tax profits. Because the interest payable by IreCo to FinCo includes an element which varies with the profits of IreCo the combined interest and profit share element is treated as a distribution. The notable exception is for securities issued in the course of securitization transactions to which section 110 TCA applies. Where the conditions of section 110 TCA are satisfied, then interest paid by the securitization SPV will be fully tax deductible, including where the interest is paid on PPLs.


1. Section 835C TCA.

2. Section 835C TCA.

3. Section 547 TCA.

4. Section 835C TCA.

5. Section 835F TCA.

6. Section 835D TCA.

7. Article 9 of the OECD Model Tax Convention.

8. This is based on relevant case law in the area as well as the Revenue Guidance on the Classification of Activities as Trading (19 Aug. 2010); available at:

9. 11 TC 538.

10. 43 TC 458.

11. 24 TC 498.

12. 40 TC 585.

13. Revenue Guidance on the Classification of Activities as Trading (19 Aug. 2010); available at:

14. Recommendation 2003/361/EC of 6 May 2003 (OJ L124, 20 May 2003, p. 36), available at

15. Section 42 of Finance Act 2010.

16. Section 130(2)(d)(iii) TCA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions