The European Commission on 12 September 2023 issued a legislative proposal for a directive on Transfer Pricing ("EU TP Proposal") which aims for the first time to harmonise EU transfer pricing ("TP") rules. Like the broader Business in Europe: Framework for Income Taxation ("BEFIT") package of which it is a part, the EU TP Proposal would require unanimous approval from the European Council. Since the changes it would require to the domestic laws of Member States are more limited in scope than other aspects of BEFIT, it is more likely to obtain approval. The Commission wants the proposal transposed by EU Member States by 31 December 2025. Ireland has not yet commented on the proposal.

Broadened Scope of Irish Rules

The EU TP Proposal would broaden the scope of Irish TP rules by capturing many arrangements not currently subject to the rules. Currently for an arrangement between persons to come within the scope of the rules, one person must broadly speaking have a greater than 50% interest in the other. The proposal would lower this threshold to a greater than 25% interest. The broadened scope could, for example, mean that joint ventures between independent enterprises come within the rules. The proposal would also capture arrangements where a person participates in the management of another person by being in a position to exercise a "significant influence" over the other. "Significant influence" is undefined in the proposal so it is uncertain whether this provision would require any change in Irish law.

The proposal would further mean that arrangements between a head office resident in another Member State and an Irish permanent establishment would be subject to the Irish TP rules that apply between companies. The Irish TP rules currently apply the authorised OECD approach for the attribution of profits to a permanent establishment to these arrangements but the EU TP Proposal would see the OECD Transfer Pricing Guidelines ("OECD TPG") become the applicable guidance.

New "Fast Track" Route to Resolving Double Taxation (without MAP)

A potentially welcome development for taxpayers which have had relatively uncontroversial TP adjustments made to their income would be the creation of a new "fast-track" route for a corresponding adjustment to be accepted by Ireland when a primary adjustment is made in another Member State. The proposal provides that once a taxpayer makes a request in these circumstances, the Member State shall ensure that it either accepts or rejects the request within 180 days. The Member State must of course agree that the primary adjustment is consistent with the arm's length principle. Irish TP law currently requires the often time-consuming routes of either a mutual agreement procedure ("MAP") being opened or an application for correlative relief being made to Irish Revenue in order for a downward adjustment to be made to an Irish taxpayer's income. Under the EU TP Proposal, if the request for a fast-track adjustment is rejected by the Member State then the taxpayer will still be able to avail of the normal MAP / correlative relief process.

Narrowing of Arm's Length Range

The EU TP Proposal requires that Member States enact TP legislation that is consistent with the OECD TPG. Irish law is already consistent with the OECD TPG. However, while the OECD TPG are not overly prescriptive on the use of an arm's length range to test a taxpayer's results, the EU TP Proposal provides that the arm's length range will be the interquartile range. If the results of a transaction fall outside the interquartile range then the Member State must make an adjustment. This rule will narrow the understanding of the arm's length range in Ireland. It could have consequences for existing pricing that produces results within the broader arm's length range (1st to 100th percentile) but not within the interquartile range (25th to 75th percentile).


Taxpayers should be aware of the changes to Irish TP law that would result from the approval of the EU TP Proposal. Arrangements that do not currently need to be considered from a TP perspective may come within the scope of Irish TP rules and current taxpayer pricing may also need to be re-evaluated if the proposal is approved.