Transfer pricing is the collection of international tax laws that oblige businesses to apply open market or “arm’s length” conditions to transactions between related entities. This means that the price charged for a given good, service, intellectual property (IP) or financial asset should match the same price as if the two parties were not related. Corporate groups that transfer goods, IP, services or finance amongst its member entities risk substantial tax costs if they do not adequately evidence that the price of those transfers were arm’s length.

In Ireland, the arm’s length price is determined by following OECD Transfer Pricing Guidelines – a 400 page manual that has become the accepted global standard in transfer pricing by business, government and other stakeholders. Amidst the many challenges businesses face from ongoing changes to international tax regimes, transfer pricing has become the area of greatest concern for businesses for two reasons:

1. Tax positions are uncertain because an arm's length price is inherently subjective and susceptible to disagreement.
2. Tax authorities are increasingly raising tax revenues by employing transfer pricing rules to assess taxes and penalties on businesses.