Due to the level of uncertainty surrounding its application, Finance Bill 2021 included draft legislation under s835E TCA1997, intended to provide clarity on the exemption for non-trading domestic (Irish to Irish) transactions.
It should be noted that trading transactions remain subject to transfer pricing rules. Finance Act 2021 rewrites s835E TCA1997, introducing a version of the legislation that appears to address some of the unintended consequences arising from the application of transfer pricing rules to certain Irish-to-Irish transactions for periods starting on or after 1 January 2022. Additional clarifying provisions are included to assist in the interpretation of the legislation. The updated legislation disapplies the basic transfer pricing rules in certain non-trading contexts, for the party to an arrangement who meets the conditions to be considered an eligible person under the legislation and where an eligible person is one party to a transaction involving two qualifying persons.
The following conditions must be met by the supplier and acquirer in order to be considered to be a qualifying person: -
- The supplier and acquirer must be chargeable to income tax or corporation tax under Schedule D (other than trading income under Case I or II in the case of a supplier) in respect of the profits, gains or losses arising from the arrangement under consideration;
- For both the supplier and acquirer, to be resident in the State for the purposes of income tax for the relevant chargeable period; and
- Both the supplier and acquirer must not be a qualifying securitisation company within the meaning of s110 TCA 1997.
There are also some enhanced anti-avoidance provisions in the updated version of s835E TCA1997 which require consideration.
Although there is an element of continued ambiguity, this version of the legislation should provide entities with a greater degree of confidence in the appropriateness of relying on the exemption for domestic transactions for chargeable periods beginning on or after 1 January 2022.
If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars corporate tax team below:
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