Close Companies
As in the UK, a close company is subject to provisions designed to counteract some corporation tax advantages particular the ability to leave funds within the company and avoid a dividend for a prolonged period.
A close company is one under the control of five or fewer participators or under the participators of persons who are directors irrespective of the number. Participators are shareholders and certain loan creditors was an interest in the company.
Controlled Foreign Corporations
Controlled Foreign Companies are effective from 1 January 2019.Broadly CFC rules are an anti-abuse measure which are designed to prevent the diversion of profits to offshore entities in low or no tax jurisdictions.
An entity is a CFC in broad terms, it is more than 50% controlled by its parent company and the tax paid by it on its profits is less than half the tax that would have applied had its income been subject to tax in the jurisdiction in which the parent company is resident.
There are a number of exemptions/exclusions to the regime. It is intended to secure that undistributed income from arrangements put in place for the essential purpose of obtaining a tax advantage is attributed to the parent company and taxable in that country where significant people or functions in respect of the CFC are carried on by the parent company.
Transfer Pricing
Ireland has transfer pricing provisions in accordance with the OECD guidelines. They apply to trading and professional services income. They apply to transactions between associated entities involving the supply of services or goods or intangible assets
The Revenue may adjust taxable profits or losses were the income has been understated or expenditure overstated due to transactions between associated entities other than on an arm’s length/market basis. Companies must justify their inter-group prices.The legislation does not apply to small medium-sized enterprises
Revenue has undertaken a transfer pricing compliance review programme. There is a dedicated unit within the large cases division which may initiate transfer pricing audits. Revenue will recognise equivalent work done by foreign revenue on the same transactions as evidence of the position.
Multinationals with Irish parents with consolidated annual revenue in excess of €750 million must prepare a country by country report. This annual requirement must include data relating to income taxes and measures of economic activity for each country.
The Irish resident entity which is part of a foreign multinational enterprise may be permitted to submit an equivalent country by country report in Ireland. Entities must notify Revenue of the filing requirements.
Ireland maintains an advance pricing agreement programme. Applications may be made to Revenue in relation to transfer pricing issues. The application may be made by a company which is tax resident or has a permanent establishment in Ireland of a non-resident for the purpose of the relevant double taxation treaty. It is intended to ease compliance in respect of complex transfer pricing issues where there is a doubt about the application of the arms-length rules or where otherwise double taxation issues may arise.