The introduction of new legislation to regulate transfer pricing will make Ireland more attractive to multinationals, according to international tax experts speaking at an event held by William Fry Tax Advisors, the Irish member firm of Taxand. Over 100 business people who attended this morning’s William Fry breakfast briefing – ‘New transfer pricing and its implications for corporate Ireland’ – heard how the introduction of the new Transfer Pricing Regime will affect multinationals operating in Ireland or looking to locate in Ireland.
Attendees were told that the 2010 Finance Bill introduced new regulations for transfer pricing that will take effect from the January 1st 2011. Transfer pricing refers to the prices at which related entities (e.g. a parent company and its subsidiary) set the price that they pay each other for goods, services, the use of money, intangible assets, and similar transactions. The legislation will cover domestic or international trading transactions entered into between associated entities.
Speaking at today’s breakfast briefing, Eamonn O’Dea, Assistant Secretary, Revenue Commissioners, said: “Transfer pricing is a fact of life for modern multinational business. The arm’s length principle (ALP), whereby the amount charged by one related party to another for a given product must be the same as would be charged between unrelated parties, complements our tax policy here in Ireland and our approach in terms of inward investment. The introduction of a Transfer Pricing Regime codifies and clarifies our existing policies and it is consistent with Ireland’s long-standing support for ALP as the standard that should be applied uniformly across countries.”
The legislation excludes small or medium-sized enterprises (SMEs). The thresholds to meet the small or medium-sized test are that the overall enterprise must have less than 250 employees and either sales of less than €50 million annually or assets of less than €43 million annually.
Speaking at the event, Shiv Mahalingham, Managing Director, Taxand UK, said, “The SME exemptions in the Irish legislation are very helpful for companies, particularly in a growth phase when they are still trying to come to terms with international tax.”
The new rules will bring Ireland in line with its main trading partners, the US and the UK.
Eamonn O’Dea said, “Ireland has underlined its commitment to the international arm’s length standard. Our practice to date has been supportive of ‘arm’s length’ pricing and we are simply codifying and clarifying that position with the new legislation— this is not a revenue raising exercise. Our 12.5% rate attracts international investment and arm’s length pricing enables companies to earn an appropriate and fair share of their profits here.”
Justin Smith, Senior Director, Taxand US, said “When a multinational corporation is looking at whether or not to locate their business in Ireland, certainty is a big factor. The new provisions regarding transfer pricing add some certainty to the equation and taking steps to be more in line with what other jurisdictions are doing can add credence to a multinational corporation’s long term perspective and make Ireland a more attractive location.”
Martin Phelan of William Fry Tax Advisors, added “This legislation is complementary to existing legislation in other jurisdictions and it brings us closer to our main trading partners. Companies now need to look at how to prepare for the introduction of the new legislation and how to develop an appropriate framework to ensure that you are complying with it on an ongoing basis. It is important to perform a health check to ensure all operating practices and arrangements are formally evidenced and agreed and take advantage of any grandfathering provisions in advance of its expiry on 1st July 2010.”
