Ireland: Transfer pricing measures included in Finance Bill 2021

Revises an exclusion from the scope of Irish transfer pricing rules

Revises an exclusion from the scope of Irish transfer pricing rules

Finance Bill 2021 (published 21 October 2021) includes certain tax provisions as previously announced by the Minister for Finance in the budget speech on 12 October 2021. Moreover, there are certain measures in the bill—including transfer pricing provisions—that were not previously announced as part of the budget.

Transfer pricing measures

Finance Bill 2021:

  • Revises an exclusion from the scope of Irish transfer pricing rules—one that is available for certain non-trading transactions between persons subject to Irish taxation. This revised provision supersedes changes made to the exclusion from the transfer pricing rules in last year’s Finance Act.
  • Includes a provision that requires profits of an Irish branch of a non-resident company to be calculated in accordance with the authorised OECD approach for the attribution of profits to a branch.

Other measures

  • Finance Bill 2021 provides for the transposition into Irish law of the general interest limitation rules pursuant to the EU Anti-Tax Avoidance Directive. The new rules would limit the tax deductibility of net borrowing costs to 30% of a taxpayer’s EBITDA (earnings before interest, taxes, depreciation, and amortization) subject to certain exceptions.
  • Finance Bill 2021 would extend the scope of the anti-avoidance provision that restricts the tax deductibility of interest on loans from a connected company used to purchase assets from another connected company. The provision would now apply to promissory notes and also provides that when a loan is refinanced, it would remain within the scope of the restriction.

Read an October 2021 report prepared by the KPMG member firm in Ireland

 

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