TP Ticker – September 2019

Ireland’s TP Rules Feedback Statement

In August, the Irish Ministry of Finance published “Ireland’s Transfer Pricing Rules Feedback Statement”, a document outlining considered revisions to the country’s transfer pricing (“TP”) regulations.  This statement is the reaction to comments the ministry had received earlier this year to a more general consultation paper.  The draft legislation includes direct reference to the OECD’s TP guidelines in their version from 2017, by determining that the arm’s-length price is to be determined in line with these guidelines.  This also entails the application of the TP documentation requirements under the OECD guidelines, which would expand on the current Irish requirements.  Small and medium enterprises, too, would now be subject to TP regulations but their documentation requirements would be less extensive. 

Finally, the draft legislation would remove the exemption of transactions agreed upon before 1 July 2010 from the TP regulations and expand TP regulation to non-trading transactions and capital transactions subject to certain conditions.  The public has the opportunity of providing further comments to the draft revisions until 13 September 2019.

The “Ireland’s Transfer Pricing Rules Feedback Statement” is available in electronic format on the website of the Irish Ministry of Finance here: https://assets.gov.ie/27357/24077dbc248e404695386e0a10fd6b24.pdf

Hong Kong’s Departmental Interpretation Notes

In July 2019, the Inland Revenue Department (“IRD”) published its Departmental Interpretation and Practice Notes 58 and 59 (“DIPN58” and “DIPN59” respectively).  DIPN59 provides the views of the IDR on Hong Kong’s transfer pricing (“TP”) regulations.  It refers to the stipulations under domestic law as well as to the respective clauses in tax conventions – where they exist – and the OECD guidance on TP.  Specifically, DIPN59 explains that the stipulations of the Inland Revenue Ordinance referring to TP are to be construed in a way that best secures consistency with the OECD rules.  A substantial part of the document details how an arm’s-length price is to be determined by means of a functional analysis and comparability analysis considering the comparability factors identified by the OECD.  Separately from these explanations, DIPN59 also contains a detailed section on comparables, that discusses practical aspects, such as use of data from outside the jurisdiction, use of databases, multiple year data, and comparability adjustments.

DIPN58 supplements these views by providing information on TP documentation-related topics such as an outline of Hong Kong’s TP documentation rules, the TP examination process, and OECD-based Master and Local Files.

From our perspective, DIPN59 is a highly accessible source for all TP matters involving Hong Kong and especially the section on comparables should be considered by valuation specialists performing benchmarks for controlled transactions involving the jurisdiction.

DIPN58 and DIPN59 can be found on the website of Hong Kong’s Inland Revenue Department here: https://www.ird.gov.hk/eng/pdf/dipn58.pdf and here: https://www.ird.gov.hk/eng/pdf/dipn59.pdf