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13.4.1. Main Rules

Definition of Related Parties

For the purpose of transfer pricing, related parties are defined as an entity which is directly or indirectly controlled by another, or where both entities are directly or indirectly controlled by a third party. This can include individual persons as a controlling party, including that individuals relatives (meaning husband, wife, ancestor, lineal descendant, brother or sister).

Application of Arm's Length Principle

The definition of arm's length principle is in line with OECD guidelines, which states that transactions with related parties must be made under comparable conditions and circumstances as if a transaction with an independent party.

Transfer Pricing Methods

Ireland’s transfer pricing legislation essentially endorses the OECD Transfer Pricing Guidelines and the principle of arm’s length transactions. These rules apply to arrangements entered into between associated persons, involving the supply or acquisition of goods, services, money, or intangible assets. They only apply to trading transactions that are taxed under Case I or II of Schedule D of the Taxes Acts (taxed at 12.5%) in the main transactions).

Ireland tax authorities require the use of the transfer pricing method that provides the most reliable results, which can include the following:

  • Traditional transaction methods:
    • Comparable uncontrolled price (cup) method
    • Resale price method
    • Cost-plus method
  • Transactional profits methods:
    • Profit split method
    • Transactional net margin method

Ireland bases the most appropriate method on the guidance found within the OECD guidelines on transfer pricing.

Use and Availability of Comparables

There are no specific guidelines on the use of comparable information. Comparable information can be used from various databases, with no specific preference by the Irish tax authorities