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Documentation and reporting
Rules and procedures
What rules and procedures govern the preparation and filing of transfer pricing documentation (including submission deadlines or timeframes)?
The Irish Transfer Pricing Rules impose an obligation on companies to whom those rules apply to have available such records as may reasonably be required for the purposes of determining whether the trading income of the company has been computed in accordance the Irish Transfer Pricing Rules. The main purpose of having transfer pricing documentation available is to enable a company, if requested, to establish readily to Irish Revenue’s satisfaction that its transfer prices are consistent with the arm's-length requirements.
The legislative requirement is that a company have transfer pricing documentation available. There is no requirement for documentation to be kept in any particular form.
Where requested by Irish Revenue, documentation must be prepared in a timely manner. The Irish Transfer Pricing Rules do not specify any submission deadlines, but in a standard audit scenario documentation is typically required to be submitted within 28 days of request.
What content requirements apply to transfer pricing documentation? Are master-file/local-file and country-by-country reporting required?
The documentation must be sufficient to demonstrate a company's compliance with the Irish Transfer Pricing Rules and the level required will be dictated by the facts and circumstances of the transactions.
The relevant transfer pricing documentation should clearly identify:
• associated persons for the purposes of the legislation;
• the nature and terms of transactions within the scope of the legislation;
• the method or methods by which the pricing of transactions were arrived at, including any study of comparables and any functional analysis undertaken;
• how that method has resulted in arm’s-length pricing or, where it has not, what computational adjustment was required and how this has been calculated. This will usually include an analysis of market data or other information on third-party comparables;
• any budgets, forecasts or other papers containing information relied on in arriving at arm’s-length terms or in calculating any adjustment made in order to satisfy the requirements of the new transfer pricing legislation; and
• the terms of relevant transactions with both third parties and associates.
Irish Revenue's Tax Briefing 07- 2010 provides that both the Transfer Pricing Guidelines of the Organisation for Economic Cooperation and Development (OECD) and the EU Code of Conduct on Transfer Pricing Documentation will be acceptable as representing good documentation practice.
Ireland requires the provision of a country-by-country report consistent with Annex III to Chapter V of the Transfer Pricing Guidelines under Section 873H of the Taxation Consolidation Act and the Irish Country-by-Country Regulations. Country-by-country reports must be filed within 12 months of the end of each fiscal year (eg, by December 31 2017 for the fiscal year ending December 31 2016).
However, in line with the OECD model legislation, these requirements apply only to an Irish resident ultimate parent company of a multinational group with annual consolidated group revenue of at least €750 million in the preceding fiscal year. A secondary filing mechanism is also available whereby a multinational group can designate an Irish resident constituent entity of the group to act as a 'surrogate parent' entity to file a country-by-country report with Irish Revenue on behalf of the group. If the ultimate parent or surrogate parent cannot file a country-by-country report, there is a requirement for a local country filing with Irish Revenue.
What are the penalties for non-compliance with documentation and reporting requirements?
Failure to comply with an Irish Revenue request for documentation required to be kept under the Irish Transfer Pricing Rules will trigger the imposition of a penalty of €4,000. Irish Revenue may also seek an order before the High Court of Ireland to compel a taxpayer to submit records or documentation.
Failure to provide a country-by-country report will render the party liable to a penalty of €19,045 and where such failure is made without reasonable excuse, a further penalty of €2,535 will apply for each day on which the failure continues.
What best practices should be considered when compiling and maintaining transfer pricing documentation (eg, in terms of risk assessment and audits)?
The documentation must be prepared on a timely basis. Irish Revenue Tax Briefing 07- 2010 provides that both the OECD Transfer Pricing Guidelines and EU Code of Conduct on Transfer Pricing Documentation will be acceptable as representing good documentation practice. In addition, the Tax Briefing notes that best practice would require preparation of the documentation at the time that the terms of the transaction were agreed. Complex, high-value transactions are likely to require more detailed documentation than simple, high-volume transactions.
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