Navigating the transfer pricing risk and controversy landscape

11 March, 2021

In recent years, Ireland's Revenue Commissioners have expanded their Transfer Pricing (TP) audit and Competent Authority resources. This is in response to the increased profile of TP across its case base. In addition, the volume of data available to tax authorities, coupled with new mechanisms for information sharing between them, has led to an increase in TP disputes globally.

Here, we explore the factors shaping the transfer pricing landscape and each of the phases of the TP risk and controversy life cycle.

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Increased Revenue focus on TP

Irish Revenue has recently increased its TP capabilities. This is an indication of the increased importance of TP to Revenue from both a compliance and monetary perspective.

Within the Revenue's Large Corporates Division (LCD), there are now two TP audit branches. They have national responsibility for carrying out risk-driven interventions to assess companies' compliance with Irish TP rules. Within Revenue’s International Tax Division there is an independent branch which acts as the Competent Authority for negotiating with foreign tax authorities on TP matters.

Against this backdrop, companies should prepare themselves for increased interactions with Revenue, and other tax authorities, on TP matters.

TP risk and controversy life cycle

In preparing for this interaction, there are three distinct phases of the TP risk and controversy life cycle that taxpayers should be familiar with.

1. Dispute prevention

Dispute prevention refers to the proactive measures a taxpayer can take to ensure that the TP positions being taken are robust and defendable in the event of an intervention by Revenue or another tax authority.

There are a number of broad measures that a company can take to reduce the risk of Revenue challenging their TP position:

  • Prepare and maintain appropriate TP documentation, including legal agreements and other contemporaneous data.

  • Embed TP into the wider tax control framework. This would include performing TP risk assessments regularly to ensure TP procedures are appropriate in managing the underlying TP risk

  • Request an Advanced Pricing Agreement (APA) with respect to more material transactions. The aim of an APA is to take away uncertainty in complex transactions and they typically cover a period of up to five years.

2. TP Intervention management

Revenue has access to a significant amount of data from various sources which it uses to inform TP risk assessments and select cases for intervention. The includes information contained in companies corporation tax returns, country-by-country reports and DAC6 reports.

Revenue can use a combination of the following interventions to examine a company’s compliance with Irish TP rules:

  • Audit

  • Aspect Query

  • TP Compliance Review (TPCR)

The information requested under each intervention type is broadly similar but procedurally there are some important differences. In particular, the opportunity to make an unprompted disclosure is still available in the event of an Aspect Query or TPCR. While taxpayers subject to an audit can still make a prompted disclosure up to the commencement of the audit, there is a heightened risk of increased penalties and publication if Revenue proposes a TP adjustment.

Regardless of the type of intervention, intervention management is key. It is important to manage and respond to these queries in a structured and cooperative manner, and to consider a strategy for any potential negotiation or settlement discussions.

3. Post-audit dispute resolution

Dispute resolution refers to the options available to a taxpayer to mitigate tax liabilities and avoid double taxation after it has received a final TP assessment or determination.

Three options are typically available to taxpayers: (i) appeal domestically, (ii) apply for a Mutual Agreement Procedure (“MAP”) to request the tax authorities involved to enter into a negotiation process, or (iii) agree to the assessment (and seek a correlative adjustment for double tax suffered).


To appeal an assessment domestically a taxpayer must submit a notice of appeal within 30 days of the assessment to the Tax Appeal Commission (TAC) to avoid it becoming final and having to pay the tax.

Similar domestic appeals processes exist in foreign jurisdictions.

It is recommended that a domestic appeal is filed first to keep the dispute resolution route open; the appeal can typically be paused to allow a MAP to proceed.


If a double tax treaty is in place between the territories where the counterparties to the transaction under audit are resident, the taxpayer may request a MAP.

The aim of a MAP process is for the tax authorities to agree the TP treatment for the transaction. A MAP request can be submitted under the relevant double tax treaty or under the EU Arbitration Convention or the EU Dispute Resolution Directive where applicable.

The time limit to submit a MAP request under a double tax treaty depends on the particular treaty, but is typically two or three years from the date the taxpayer is first notified of the final tax assessment.The time limit under the EU Arbitration Convention and the EU Dispute Resolution Directive is three years.

Agree and seek a correlative adjustment

A taxpayer can choose to settle unilaterally with a tax authority and pay the tax due and then seek a correlative adjustment. However, the tax authority considering the correlative relief claim may not agree with the terms of the settlement and may deny or only grant partial relief. Therefore, tax authorities prefer MAP requests.

Five key actions to take now

Developing a clear understanding of each phase of the TP risk and controversy life cycle is important in ensuring TP audit interventions and double tax issues can be dealt with effectively. 

So what steps can taxpayers take to achieve this?

1. Proactively manage TP risk

Review TP documentation, benchmarking studies, intercompany legal agreements and internal defence files to ensure that these are up to date, consistent across all territories, and robust so they can be used to defend existing TP positions and policies in the event of an intervention.

2. Include TP in your Tax Control Framework

The establishment of a Tax Control Framework (TCF) is key to the management of tax risk. The TCF comprises various structures, arrangements and process controls in place to ensure that companies’ tax filings are accurate. Taxpayers should ensure that TP is considered as part of a TCF, and ensure that regular TP risk assessment processes are built into that framework.

3. Be aware of the different types of TP intervention

Revenue can use TP audits, aspect queries, or TPCRs to review TP positions. There are key procedural differences between each of these, particularly in terms of a taxpayer’s entitlement to make a qualifying disclosure and the sanctions that can be imposed by Revenue. As such, when a taxpayer is notified of an intervention, it is important that they are aware of the type of intervention and its implications.

4. Cooperate and communicate with the tax authority

During TP interventions it is important to manage and respond to tax authority queries in a structured and cooperative manner.

In addition, many of the options available to taxpayers in the dispute resolution phase are built on the principles of mutual cooperation and transparency between Revenue and the taxpayer; this should be embraced by the taxpayer in order to facilitate success.

5. Understand your options for dispute resolution

If a TP assessment has been received, the taxpayer should consider all the options that are available before settling with the tax authority. The options to appeal, pursue MAP, or settle and claim correlative adjustment are typically available to taxpayers in most circumstances. The various time limits associated with these different options should be borne in mind, as it may be an important factor in determining the next steps for resolution of the TP dispute.

We are here to help you

Revenue interventions and TP disputes present many challenges for companies.

Our Tax Risk and Controversy team, which includes ex-Revenue officials, has deep expertise in all aspects of Revenue interventions, appeals, tax disputes and management of tax risk. Our expertise spans Transfer Pricing and all tax heads.

We are ready to help you navigate through the challenging landscape, ensuring that the monetary, reputational and business risks that you face are carefully managed. Contact us today.

Contact us

Ronan Finn

Partner, PwC Ireland (Republic of)

Aidan Lucey

Partner, PwC Ireland (Republic of)

Danielle Cunniffe

Partner, PwC Ireland (Republic of)

Kevin Ryan

Director, PwC Ireland (Republic of)

Tel: +353 87 410 7836

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