Transfer Pricing

New measures not announced in Budget 2025

Finance Bill 2024 introduced three transfer pricing-related developments:

1. Amount B: Section 835DA has been added into Irish TP law and provides for the application of the OECD’s Pillar One: Amount B approach in certain limited instances. Amount B is a simplified approach that may be applied to certain baseline marketing and distribution transactions between Irish entities and entities in certain covered jurisdictions as published by the OECD on 17 June 2024.
   
2. Joint audits: Finance (No. 2) Act 2023 transposed Article 12a of EU Directive 2021/514 (“DAC 7”) providing a basis for joint audits within the EU for tax periods beginning on/after 1 January 2024. Finance Bill 2024 clarifies that, where Irish Revenue conducts a joint audit in another EU State, their rights and obligations are determined in accordance with the laws of that other Member State but their powers cannot exceed the scope of their powers under Irish domestic law.
   
3. Repayments following mutual agreement procedures (“MAP”) and correlative relief claims: A new section 826B has been introduced and provides that a repayment of tax in respect of correlative relief or a mutual agreement can be made to another group company in instances where the company that would have been entitled to the repayment has ceased to exist (e.g., it has been liquidated).
   
   

What was unexpected?

1. Amount B: The introduction of Amount B into Irish TP legislation was expected, given that Budget 2025 outlined Ireland’s commitment to the OECD’s two-pillar solution and its ongoing active engagement with the OECD on technical matters in respect of Amount B.
2. Joint audits: While Finance (No. 2) Act 2023 had outlined that rights and obligations of a taxpayer subject to a joint audit in Ireland are the same as under an Irish domestic audit, this further clarification in respect of Revenue’s powers while operating in another Member State aligns Irish law with DAC 7.
3. Repayments following MAP and correlative relief claims: The introduction of section 826B was not well flagged in advance of the Finance Bill. However, it is a welcome addition.
   

When? What to do now?

1. Amount B: Where applicable, Amount B may apply for accounting periods commencing on/after 1 January 2025.
2. Joint audits: While it may be some time before joint audits are issued under DAC 7, taxpayers can prepare by considering who, internally, might co-ordinate interactions with tax authorities, what documentation is in place with respect to cross-border transactions and whether any transactions are already under scrutiny in other Member States.
3. Repayments following MAP and correlative relief claims: Section 826B applies to the repayments of tax arising from a correlative relief adjustment determination made by Revenue or mutual agreement reached on or after the date of passing of this Finance Bill.
   

Our view

1. Amount B: The introduction of Amount B signals Ireland’s commitment to respect the outcome of Amount B where it is applied by covered jurisdictions comprising of low and middle-income jurisdictions. However, as there are likely to be limited trade flows with the covered jurisdictions, the amendments are likely to have a limited impact for Irish taxpayers.
2. Joint audits: Finance Bill 2024 aligns Irish domestic legislation with the provisions of DAC 7 and, in effect, mean that, where tax authority powers vary among Member States, it is the lesser of the powers (e.g., in respect of time limits or requests for information) which will apply during the joint audit. Once a joint audit commences, and throughout the audit process, it will be important to monitor and ensure that the taxpayer’s rights and obligations are respected and powers conferred under domestic Irish tax law are not breached by tax officials from Member States present in Ireland.
3. Repayments following MAP and correlative relief claims: The introduction of Section 826B will be welcomed by multinationals as it provides a mechanism for the repayment of tax in instances where the company that originally made the correlative relief or MAP claim has ceased to exist.