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The Minister for Finance, Paschal Donohoe TD, today launched a public consultation on proposed changes to Ireland’s transfer pricing rules, in order to bring our rules in lines with the Authorised OECD Approach (AOA) to the attribution of profits to branches of non-resident companies.
Following the substantial modernisation and extension of our transfer pricing rules in Finance Act 2019, the next step in this modernisation process is to extend transfer pricing rules to the taxation of branches in Ireland in line with the AOA.
The AOA seeks to attribute to a permanent establishment, or branch, the profits that it would have earned at arm’s length if it were a legally distinct and separate enterprise performing the same or similar functions under the same or similar conditions. Therefore, it incorporates separate entity and arm’s length principles. The aim of the AOA is to apply to intra-company ‘dealings’, i.e. dealings among separate parts of a single enterprise, transfer pricing principles that apply to inter-company transactions, i.e. transactions between different, albeit associated, enterprises.
The public and interested stakeholders are now invited to give their views on the issues detailed in the public consultation document. Responses received on the policy issues detailed in this public consultation will form part of the Minister’s consideration of draft legislation on this matter.
The consultation period will run from today 16 March 2021, to 12pm on 16 April 2021. Any submissions received after this date may not be considered.
The preferred means of response is by email to: tpreview@finance.gov.ie
ENDS
Notes to Editors;
As was indicated in the January 2021 update to Ireland’s Corporation Tax Roadmap, the next step in the modernisation of Ireland’s transfer pricing rules is to extend transfer pricing rules to the taxation of branches in Ireland in line with the ‘Authorised OECD Approach’ (AOA). It is intended to bring forward legislation in Finance Bill 2021.
Non-resident companies trading in Ireland through a branch or agency are currently chargeable to corporation tax in accordance with section 25 TCA 1997. Under section 25(1) TCA 1997, a company that is not resident in the State is within the charge to corporation tax if it carries on a trade in the State through a branch or agency. If it does so, the non-resident company is chargeable to corporation tax on all of its chargeable profits, wherever arising. Under section 25(2) TCA 1997, the chargeable profits of such a non-resident company comprise (i) any trading income arising directly or indirectly through or from the branch or agency, and any income from property or rights used by, or held by or for, the branch or agency, and (ii) chargeable gains.
It is considered that the existing domestic legislation governing the computation of branch profits should be amended to bring it into line with international best practice in this area. The AOA seeks to attribute to a permanent establishment, or branch, the profits that it would have earned at arm’s length if it were a legally distinct and separate enterprise performing the same or similar functions under the same or similar conditions. Therefore, it incorporates separate entity and arm’s length principles. The aim of the AOA is to apply to intra-company ‘dealings’, i.e. dealings among separate parts of a single enterprise, transfer pricing principles that apply to inter-company transactions, i.e. transactions between different, albeit associated, enterprises.
In anticipation of legislating for the adoption of the AOA, we are now inviting feedback from stakeholders. The public consultation document contains examples of what some of the legislation implementing the AOA may look like, along with consultation questions on a range of technical and policy issues.