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Considerations for Irish Transfer Pricing Documentation

06 May, 2021

The updated Irish Transfer Pricing (TP) guidance (Part 35A-01-01 of the Tax and Duty Manual) provides additional detailed guidance to taxpayers on the application of changes introduced by Finance Act (FA) 2019. One of the aspects the TP guidance covers is in respect of TP documentation and the requirements to be satisfied to comply.

Our previous insight gave an overview of the enhanced TP documentation requirements [i.e. master file (MF) and local file (LF)] and a new penalty regime introduced by FA 2019 and what this means for you.

This insight provides details on the additional guidance provided in the updated TP guidance specifically pertaining to TP documentation and what this means for taxpayers that satisfy the de minimis consolidated group revenue threshold and hence, fall within the scope of the enhanced TP documentation requirements.

Image of Ha'penny bridge over river Liffey in Dublin city.

Key insights from the TP guidance

The key insights surrounding enhanced TP documentation requirements provided in the updated guidance are summarised below:

Reconciliation of tested party information to financial statements

The LF must contain information showing how the TP policy was applied, including a reconciliation to the local statutory accounts.

This requirement will be of particular importance for Groups that apply their transfer pricing policy using non-Irish GAAP accounts. Such reconciliation should be reviewed and updated or performed on an annual basis to ensure compliance with TP documentation obligations.

Country or Irish LF versus Multiple individual files

In order to ease the TP documentation compliance burden, taxpayers have the option of preparing a country file for all their Irish entities as compared to multiple Irish LFs. If taxpayers choose to avail of this option, it is important to note that entity level qualitative and quantitative information should be included in such country files.

Counterparty TP documentation

In the event Irish taxpayers wish to rely on counterparty or group TP documentation for certain intercompany arrangements (in entirety or for certain sections) then such an option is available. However, in such circumstances, the counterparty or group TP documentation should contain the information as required under the 2017 OECD TP guidelines and the Irish TP legislation for LF.

Also, the Irish entity LF should make reference to or include (for example, by way of an appendix to the LF) the relevant sections from the counterparty or group TP documentation.

Documentation held outside the state

TP documentation prepared and stored outside Ireland will be accepted by the Irish Revenue if

  • it has been prepared no later than the due date of the annual corporation tax return; and

  • is provided to the Irish Revenue within 30 days of request.

As mentioned above, such TP documentation should be in accordance with the 2017 OECD TP Guidelines and the Irish TP legislation.

Frequency of review of TP documentation

The updated TP guidance notes that the TP documentation must be

  • up to date and contemporaneous (i.e. prepared by the due date of the annual corporation tax return); and

  • reviewed regularly to demonstrate the arm's length nature of the intercompany transaction.

The guidance also notes that while the reconciliation of the TP policy to the local statutory accounts is to be performed annually, the other facts stated in the TP documentation, to the extent these are materially unchanged, can be carried forward to the subsequent year TP documentation and updated at less regular intervals.


Where the transactional net margin method (TNMM) is selected as the most appropriate method and hence a TNMM benchmarking study is used by the taxpayer in the LF to demonstrate the arm's length nature of the intercompany transactions, then the updated TP guidance has noted the following:

  • The Irish Revenue expects a full benchmarking study to be conducted every three (3) years and in the interim years, the taxpayer must refresh the financials of the accepted comparables.

  • Pan-European comparables may be accepted in the benchmarking study however the tested party's local market or geographical difference should be factored, to the extent possible, into the benchmarking.

Low-value intra-group services guidelines superseded

The low-value intra-group services guidelines issued by Irish Revenue through the Tax and Duty Manual dated 15 March 2018 are superseded and replaced by the low value-adding intra-group services guidance provided under the Chapter VII of the 2017 OECD Guidelines. This change is applicable for accounting periods commencing on or after 1 January 2020.

Scope of Irish TP legislation expanded

As mentioned in our previous insight the FA 2019 has broadened the scope of Irish TP legislation to now include non-trading transactions, capital transactions (exceeding market value of €25 million) and previously grandfathered transactions, with limited exceptions.

The updated TP guidance now provides for additional guidance and clarifications around the scope and applicability of TP documentation to such transactions. The key insights are summarised below:

  • While the OECD financial transactions TP paper issued in February 2020 is not yet enshrined in law, it will be considered as best practice by Irish Revenue in analysing issues and testing the arm’s length nature of financial transactions. Given this, taxpayers will be required to test the arm's length nature of the quantum of debt (i.e. debt capacity and serviceability analysis), in addition to the existing interest rate analysis requirements, in the LF for debts which are in place for the period on or after 1 January 2020.

  • The arm's length nature of historic transactions now within scope of the Irish TP legislation would have to be tested based on when the arrangement was entered into. Having said this the updated TP guidance does mention that if it is not possible to trace historic information following reasonable efforts then taxpayers can rely on the earliest information that is available.

  • Where a capital transaction falls within the scope of Irish TP rules (i.e., transactions whose market value exceeds €25 million) then the Irish TP rules will replace market value rules.

Five key actions to take now

Consider how reconciliation would be performed and the impact of such reconciliation

Taxpayers should consider how they will perform a reconciliation of the application of TP policy to the local statutory accounts, given that this reconciliation needs to be included in the Irish TP documentation on an annual basis.

Also, in performing the reconciliation, taxpayers may need to identify differences arising on account of TP policies which are based on non-Irish GAAP accounts. A careful examination of the treatment of these differences must be considered by taxpayers given the disclosure required in the local TP documentation.

This reconciliation exercise could be complex and time consuming where there are significant intercompany transactions undertaken by the taxpayer during the year.

Consider the possibility of availing of the country file simplification measure to ease compliance burden

To ease the compliance burden of taxpayers Irish Revenue have provided for simplification measures, one of them being a country file. To this extent, taxpayers should consider whether availing of the simplification measure is possible for FY 2020 and the impact of the same.

For certain groups, a country file or subgroup country file may be an efficient manner of documenting multiple functionally similar entities or similar intercompany transactions. On the other hand, we do envisage situations where distinct LFs may be preferable given the distinct nature of the functional profile and/or the intercompany transactions undertaken by Irish entities within the same group.

Also, it is important to consider this option from a Revenue Authority audit perspective given that a country file or subgroup country file will lead to providing information on all or some of the Irish entities as opposed to just the entity that is subject to audit.

Review existing TP documentation

Taxpayers should review the existing TP documentation, including benchmarking analysis currently available within the Group to test the arm's length nature of intercompany transactions which are within scope of the Irish TP legislation. If TP documentation exists, in order to determine if reliance can be placed on it, it is important to consider whether such TP documentation:

  • Is in compliance with the 2017 OECD guidelines and the Irish TP legislation such that all information required is available in this documentation; and

  • Requires any update to reflect the most recent facts or whether a bridging document is required to include sections that are missing and required under the Irish TP legislation.

  • Is prepared contemporaneously and can be submitted within 30 days of request by the Irish Revenue.

Review existing benchmarking analysis

In connection with a TNMM benchmarking analysis the taxpayer should consider:

  • when was the benchmarking study performed and

  • whether they need to update the benchmarking study or undertake a new benchmarking study

Practical point to consider: If the benchmark is being relied on by one or more additional entities in the group (in different jurisdictions), consideration should be given to whether the benchmark satisfies the requirements of those jurisdictions also.

Consider the approach to be adopted for the historic intercompany transactions now in scope of the Irish TP legislation

As mentioned in our previous insight it is important that taxpayers perform a detailed review of intercompany transactions to identify transactions that fall within scope of FY 2020 Irish TP documentation (particularly given the expansion of the Irish TP legislation).

Having identified the transactions which are now within the scope of the Irish TP legislation, taxpayers should start considering the approach to be adopted to testing the arm's length nature of such transactions, particularly the more historic intercompany transactions where obtaining information could be challenging.

The updated TP guidance does mention, in the context of tracing historic information, that taxpayers can rely on the earliest information that is available. However, there is a relatively high burden of proof on taxpayers to demonstrate that all efforts to trace the original or historic data have been exhausted and due consideration has been given to any available information that could be used to assist in testing the arm's length nature of such historic transactions at the time of the arrangement.

We are here to help you

Our transfer pricing group has extensive experience in assisting, leading and coordinating domestic and international TP projects across all industries. Our team comprises professionals from countries where the TP documentation regime has been in place for some time, and know how to manage the issues involved in ensuring documentation compliance.

We use the power of our local experts together with PwC's global network to provide our clients with the best solutions. If you would like to know more, contact us today to discuss how we can assist you through the new TP documentation compliance cycle.

Contact us

Ronan Finn

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6105

Gavan Ryle

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 8704

Aoife Harrison

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 5537

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