Revenue's €748M Transfer Pricing Crackdown
Revenue's €748M Transfer Pricing Crackdown
Please comment on Revenue's recent engagement with taxpayers around Transfer Pricing matters
Katie Auld, Director, Transfer Pricing & Global Value Chain: "Thirty-three transfer pricing compliance interventions completed by the Revenue Commissioners (“Revenue”) conducted recently have yielded €748 million. Of this amount, €233 million is due to interest and penalties, while a restriction in trading losses of €952 million represents a corporate tax impact of €119 million.
For a myriad of reasons, multinational enterprises may have historically been more reluctant to allocate funds to transfer pricing compliance in Ireland compared to their other jurisdictions. The recent increase in the Revenue’s issuance of formal requests for transfer pricing documentation as well as heightened focus on transfer pricing policies during tax audit may cause taxpayers to reconsider the allocation of their tax budget to substantiate their transfer pricing framework in Ireland.
More specifically, companies in Ireland must self-declare in the tax return whether they meet the requirements for transfer pricing documentation. If the documentation is not provided within 30 days of a formal request, the penalty is €25,000.
In addition, trading losses have recently been challenged by Revenue. In certain cases, Revenue have asserted that there is an insufficient level of substance in Ireland to be considered as carrying on a trade. The taxpayer may need to substantiate the commercial basis for its activities, which may involve supplying Revenue with details on employees with the relevant skills, expertise, experience and authority to carry on the proposed trading operations.
In short, the transfer pricing landscape in Ireland is becoming a focal point and should not be overlooked."
Katie Auld, Director, Transfer Pricing & Global Value Chain: "Thirty-three transfer pricing compliance interventions completed by the Revenue Commissioners (“Revenue”) conducted recently have yielded €748 million. Of this amount, €233 million is due to interest and penalties, while a restriction in trading losses of €952 million represents a corporate tax impact of €119 million.
For a myriad of reasons, multinational enterprises may have historically been more reluctant to allocate funds to transfer pricing compliance in Ireland compared to their other jurisdictions. The recent increase in the Revenue’s issuance of formal requests for transfer pricing documentation as well as heightened focus on transfer pricing policies during tax audit may cause taxpayers to reconsider the allocation of their tax budget to substantiate their transfer pricing framework in Ireland.
More specifically, companies in Ireland must self-declare in the tax return whether they meet the requirements for transfer pricing documentation. If the documentation is not provided within 30 days of a formal request, the penalty is €25,000.
In addition, trading losses have recently been challenged by Revenue. In certain cases, Revenue have asserted that there is an insufficient level of substance in Ireland to be considered as carrying on a trade. The taxpayer may need to substantiate the commercial basis for its activities, which may involve supplying Revenue with details on employees with the relevant skills, expertise, experience and authority to carry on the proposed trading operations.
In short, the transfer pricing landscape in Ireland is becoming a focal point and should not be overlooked."