How has Ireland transformed its tax policy?: Changes in the “European tax haven”

December 31, 2021

Cristina Benítez Ginesta, a specialized law in International Taxation, commented on the changes the Irish government has made on transfer pricing in the blog “Legal Today.” Undoubtedly, it means a tax revolution for the country, attractive for its image as a “European tax haven.”

Formal Transfer Pricing Obligations

Since 2020, Ireland has decided to implement a series of tax measures to comply with OECD guidelines and European Union Directives, leaving behind the low-tax policy that attracted multinational companies such as Google and Facebook to locate in the Celtic home country.

In 2017, the OECD published transfer pricing guidelines, being implemented in Ireland from 2020. Therefore, it incorporated new transfer pricing rules to its regulations, which will be discussed below:

  • Companies must validate that their business operations and capital and financial transactions comply with Transfer Pricing regulations.
  • The time limitation that prohibited the analysis of transactions carried out before July 1, 2010, has been eliminated.
  • Companies with a turnover of more than 250 million euros must file the Master File, and those having a turnover of more than 50 million euros must prepare the Local Report.
  • The analysis of financial transfer pricing transactions will be intensified. Therefore, companies will have to demonstrate that they take into account the borrower’s borrowing capacity and that the fixed interest complies with the arms’ length principle.

Benítez Ginesta estimates these tax changes as a historic revolution in Ireland. Both the increase in the tax rate, the Anti-Abuse Directive (ATAD), and transfer pricing will be the first steps in this reform of the tax system, which is already causing a stir.

Source: Legal Today 30/12/21