Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

March 3, 2021

Irish Revenue issues guidance on transfer pricing legislation

Executive summary

On 24 February 2021, the Irish Revenue Commissioners issued a detailed Tax and Duty Manual (TDM) on transfer pricing to provide guidance on the operation of transfer pricing rules as set out in Part 35A of the Taxes Consolation Act, as updated by Finance Act 2019. This legislation applies to companies with accounting periods commencing on or after 1 January 2020, or to capital transactions which occurred on or after that same date. Although transfer pricing legislation was introduced in 2010, this is the most comprehensive guidance that the Revenue Commissioners have publicly issued on the application of these provisions to date.

The guidance also specifically refers to the adoption into law of the 2017 Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines (TPG), while also referencing the 2020 Transfer Pricing Guidance on Financial Transactions (Chapter X). This highlights Ireland’s commitment to implementing international best practice from a transfer pricing perspective.

This Alert summarizes the key areas covered by the TDM.

Detailed discussion

Quantum of debt

The TDM refers to the OECD guidance published in February 2020 for determining whether the conditions for certain financial transactions are consistent with arm’s-length principles (Chapter X). Revenue states that Chapter X will be considered best practice for analyzing financial transactions, although it is subject to Ministerial Commencement order in order to take legislative effect.

The TDM also reiterates the steps included in the 2017 TPG to accurately delineate a transaction, outlining that taxpayers must consider not just the arm’s-length pricing of related-party transactions, but also whether independent parties “would” have entered into the particular related-party transactions in the first instance. The guidance also reaffirms the potential for the re-characterization of transactions as a distribution by Irish Revenue.

In addition to the interest rate and terms and conditions of a loan, the guidance confirms that an arm’s-length quantum of debt analysis is required to accurately delineate a financial transaction, as set out in the 2017 TPG. The TDM specifies that a debt capacity analysis should be considered at the time an arrangement was entered into, bringing into scope financial arrangements agreed prior to 1 January 2020 remaining in place at that date. Revenue acknowledges that there may be limited availability of historic information in relation to some arrangements but that taxpayers can use other available information to assist with assessing this (e.g., budgets/cashflows prepared for other purposes, entity results before the transaction, etc.)

Exclusions from transfer pricing rules

Certain domestic transactions continue to remain outside the scope of Irish transfer pricing rules, subject to certain anti-avoidance provisions. For the exclusion to apply, all of the following requirements must be met in relation to that arrangement:

  • It must involve a supplier and an acquirer who are both ”qualifying relevant persons.”

  • The profits or gains or losses of the supplier or acquirer arising from the relevant activities must be chargeable to tax under Case III, IV or V of Schedule D (i.e., under Schedule D but other than Case I or II).

  • The arrangement is not part of any scheme with another party who is not a ”qualifying relevant person” and the sole or main purpose is to obtain a tax advantage.

The revision of Section 835E relating to Irish domestic transactions proposed by Finance Act 2020 has not been included in the TDM. Therefore, it remains uncertain how Revenue will interpret certain aspects of the proposed changes which are subject to a Ministerial commencement order. EY will continue to monitor, review and engage in discussions on this and will provide the necessary updates in due course.

Where a taxpayer considers that a transaction is outside the scope of Irish transfer pricing rules, they are obliged to keep such records as may reasonably be required for the purposes of determining that the exemption requirements are met. This should be specified in a company’s transfer pricing documentation or local file, together with an explanation as to how this conclusion has been reached.

Transfer pricing documentation

Practical application

For accounting periods commencing on or after 1 January 2020, taxpayers are required to prepare master file and local file documentation, subject to a €250m and €50m annual group consolidated threshold respectively. Revenue has specified that certain simplification measures can be adopted, provided compliance with the transfer pricing documentation requirements is maintained:

  • Information showing how the transfer pricing policy was actually applied in each period should be updated annually, reconciled to the underlying financial statements. However, to the extent that other facts and circumstances are materially unchanged, the content of transfer pricing documentation may be carried forward from one year to the next and updated at less regular intervals.

  • Companies can choose to prepare a consolidated ”Country File” for all Irish entities of a multinational enterprise group as an alternative to providing an individual local file for each Irish group company. However, this requires that individual company information is set out within the single Country File as opposed to being consolidated therein.

  • Revenue will accept counter-party documentation to evidence transfer pricing for certain aspects of arrangements to avoid duplication and to minimize the cost of compliance. Similarly, transfer pricing documentation prepared and stored outside Ireland will still be accepted once prepared and provided upon request within the Irish statutory timeframes.

Benchmarking analysis

Revenue expects a full benchmarking study to be conducted every three years by taxpayers, with the underlying financials for the selected comparables being refreshed on an annual basis. However, the guidance provides that benchmarking analysis can be relied upon for multiple periods where it is reasonably contemporaneous, the economic circumstances are not materially different and it continues to be relevant to the particular facts and circumstances of the arrangement.

Penalty protection

Legislation provides that where a company prepares its documentation on or before the documentation deadline (the date the tax return is due), provides this to Irish Revenue within the 30-day statutory timeline and demonstrates “reasonable efforts” to comply with transfer pricing legislation, any transfer pricing adjustment will be ignored for purposes of determining whether a tax-geared penalty applies to the company. The TDM sets out what can be considered reasonable efforts (e.g., conducting functional interviews, verification of factual information, validation of benchmarks, assessment of control, etc.) that should be set out within the transfer pricing documentation, together with some illustrative examples that do not constitute reasonable efforts.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin

Ernst & Young LLP (United States), Irish Tax Desk, New York

Ernst & Young LLP (United States), Irish Tax Desk, San Jose


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more