Finance Act 2024
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Amendment of Part 35A of Principal Act (transfer pricing) | ||
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45. (1) Part 35A of the Principal Act is amended by the insertion of the following section after section 835D: | ||
“OECD Pillar One - Amount B | ||
835DA. (1) (a) In this section— | ||
‘covered jurisdiction’ means a jurisdiction listed in the document entitled Statement on the definition of covered jurisdiction for the Inclusive Framework political commitment on Amount B, published by the OECD on 17 June 2024; | ||
‘OECD’ has the same meaning as in section 835D(1); | ||
‘OECD Pillar One Amount B guidance’ means the document entitled OECD (2024), Pillar One - Amount B: Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, published by the OECD on 19 February 2024, supplemented by the document entitled Statement on the definitions of qualifying jurisdiction within the meaning of section 5.2 and section 5.3 of the simplified and streamlined approach, published by the OECD on 17 June 2024; | ||
‘one-sided transfer pricing method’ and ‘tested party’ shall be construed in accordance with the transfer pricing guidelines (within the meaning of section 835D); | ||
‘qualifying arrangement’ shall be construed in accordance with subsection (2). | ||
(b) A word or expression which is used in this section and is also used in the OECD Pillar One Amount B guidance has, unless the context otherwise requires, the same meaning in this section as it has in the OECD Pillar One Amount B guidance. | ||
(2) (a) For the purposes of this section, subject to paragraph (b), a qualifying arrangement is an arrangement that— | ||
(i) is— | ||
(I) a buy-sell marketing and distribution arrangement where the distributor under the arrangement purchases goods from one or more than one associated company for wholesale distribution to independent parties, or | ||
(II) a sales agency or commissionaire arrangement where the sales agent or commissionaire under the arrangement contributes to one or more than one associated company’s wholesale distribution of goods to independent parties and where those goods are sold by the associated company without either it, or the sales agent or commissionaire, engaging other associated parties as intermediaries between it and the independent party customers, | ||
and | ||
(ii) exhibits the economically relevant characteristics that mean it can be reliably priced using a one-sided transfer pricing method where the distributor, sales agent or commissionaire, as the case may be, is the tested party. | ||
(b) Notwithstanding paragraph (a), an arrangement shall not be a qualifying arrangement where— | ||
(i) the arrangement involves the distribution of non-tangible goods, services or the marketing, trading or distribution of commodities, | ||
(ii) the distributor, sales agent or commissionaire, as the case may be, that is the tested party, carries out non-distribution activities and the arrangement cannot be adequately evaluated and reliably priced separately from those non-distribution activities, or | ||
(iii) the distributor, sales agent or commissionaire, as the case may be, that is the tested party has incurred annual operating expenses which are— | ||
(I) lower than 3 per cent, or | ||
(II) greater than 30 per cent, | ||
of its annual net revenues. | ||
(3) Subject to subsections (4) and (6), this section shall apply to a qualifying arrangement for a chargeable period where, for that chargeable period— | ||
(a) (i) the supplier in relation to the qualifying arrangement is a company resident in the State and the acquirer is— | ||
(I) the distributor, sales agent or commissionaire, as the case may be, under the qualifying arrangement, and | ||
(II) a company which, by virtue of the law of a covered jurisdiction, is resident, for the purposes of a tax which corresponds to corporation tax, in a covered jurisdiction, | ||
or | ||
(ii) the acquirer in relation to the qualifying arrangement is a company resident in the State and the supplier is— | ||
(I) the distributor, sales agent or commissionaire, as the case may be, under the qualifying arrangement, and | ||
(II) a company which, by virtue of the law of a covered jurisdiction, is resident, for the purposes of a tax which corresponds to corporation tax, in a covered jurisdiction, | ||
(b) under the tax law of the covered jurisdiction, the arm’s length amount of consideration for the supply and acquisition under the qualifying arrangement may be determined in accordance with the OECD Pillar One Amount B guidance, | ||
(c) the profits of the distributor, sales agent or commissionaire, as the case may be, relating to that qualifying arrangement are charged to tax in that covered jurisdiction and such profits are determined in accordance with the OECD Pillar One Amount B guidance, and | ||
(d) the covered jurisdiction is a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made. | ||
(4) For the purposes of subsection (3), the arm’s length amount of consideration for a supply and acquisition under a qualifying arrangement refers to the amount of consideration that independent parties dealing at arm’s length would have agreed in relation to the supply and acquisition. | ||
(5) Where this section applies to a qualifying arrangement for a chargeable period, this Part shall apply— | ||
(a) to the qualifying arrangement for the chargeable period as if— | ||
(i) in section 835C, the following subsection were substituted for subsection (4): | ||
‘(4) (a) The arm’s length amount of consideration for a supply and acquisition under an arrangement shall be determined by— | ||
(i) identifying the actual commercial or financial relations between the supplier and the acquirer and the conditions and economically relevant circumstances attaching to those relations (in this paragraph referred to as the ‘identified arrangement’), and | ||
(ii) subject to paragraph (b), applying the transfer pricing method set out in the transfer pricing guidelines (within the meaning of section 835D) that is, in the circumstances, the most appropriate so as to determine the arm’s length amount of consideration for the identified arrangement. | ||
(b) For the purposes of paragraph (a)(ii), the transfer pricing method that is the most appropriate to determine the arm’s length amount of consideration for a qualifying arrangement (within the meaning of section 835DA) shall be determined in accordance with the OECD Pillar One Amount B guidance (within the meaning of section 835DA).’, | ||
and | ||
(ii) in section 835D, the following definition were substituted for the definition of “transfer pricing guidelines”: | ||
‘ “transfer pricing guidelines” means the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published by the OECD on 20 January 2022 supplemented by— | ||
(a) such additional guidance, published by the OECD on or after the date of passing of the Finance Act 2022 , as may be designated by the Minister for Finance for the purposes of this Part by order made under subsection (3), and | ||
(b) the OECD Pillar One Amount B guidance (within the meaning of section 835DA);’, | ||
and | ||
(b) as if in section 835G— | ||
(i) in subsection (1), the following definition were substituted for the definition of “local file”: | ||
‘ “local file” means a report containing— | ||
(a) the information specified in Annex II to Chapter V of the transfer pricing guidelines, and | ||
(b) where the relevant person is a party to a qualifying arrangement to which section 835DA applies— | ||
(i) the information specified in paragraph 60 of the OECD Pillar One Amount B guidance (within the meaning of section 835DA), | ||
(ii) the financial statements of the distributor, sales agent or commissionaire, as the case may be, for each period of account, which corresponds to the chargeable period of the relevant person, | ||
(iii) confirmation, in respect of each arrangement to which that section applies, and for each period referred to in subparagraph (ii), that the conditions referred to in paragraphs (b) and (c) of section 835DA(3) are satisfied, | ||
(iv) confirmation that it is intended that the condition referred to in paragraph (c) of section 835DA(3) will be satisfied in respect of a qualifying arrangement for a minimum period of 3 years commencing from the first day of the first chargeable period to which section 835DA applies to the qualifying arrangement, unless— | ||
(I) the arrangement is no longer a qualifying arrangement during that period of 3 years, or | ||
(II) there is a significant change in the distributor’s business, | ||
and | ||
(v) where clause (I) or (II), as the case may be, of subparagraph (iv) applies, details of the circumstances in which the clause concerned so applies;’, | ||
(ii) the following subsection were inserted after subsection (1): | ||
‘(1A) A word or expression which is used in the definition in subsection (1) of “local file” and is also used in the OECD Pillar One Amount B guidance (within the meaning of section 835DA) has, unless the context otherwise requires, the same meaning in that definition as it has in the OECD Pillar One Amount B guidance (within the said meaning).’, | ||
and | ||
(iii) the following subsection were inserted after subsection (3): | ||
‘(3A) Where the relevant person is a party to a qualifying arrangement to which section 835DA applies for a chargeable period, the relevant person shall submit a notification to the Revenue Commissioners that the section applies, in such manner and form as may be prescribed by the Revenue Commissioners, no later than the date on which a return for the chargeable period is required to be delivered.’. | ||
(6) This section shall only apply where a qualifying arrangement is entered into— | ||
(a) for bona fide commercial reasons, and | ||
(b) not as part of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax.”. | ||
(2) Section 835C(3) is amended by the substitution of “subsections (4) and (5), subject to section 835DA, shall apply” for “subsections (4) and (5) shall apply”. | ||
(3) Subsections (1) and (2) shall apply for chargeable periods (within the meaning of section 321(2) of the Principal Act) commencing on or after 1 January 2025. |