There has been an important change in the way in which Irish Revenue deals in practice with claims for correlative adjustment under the Irish tax code. Historically, Irish Revenue was prepared to allow relief for correlative adjustments after they were finalised with the Revenue Authority in the other jurisdiction and were reflected in the accounts of the Irish entity.
However, in the recent past we are seeing evidence that Irish Revenue is adhering to the strict application of the relevant legislation which provides that ".......to the extent that a claim to repayment of tax for a chargeable period arises from a correlative adjustment, the claim shall not be regarded as a valid claim until the quantum of the correlative adjustment is agreed in writing by the competent authorities of the two Contracting States."
As a result Irish Revenue is now stating that it expects the Irish Competent Authority to be informed of possible adjustments so that they may become involved in such negotiations where necessary.
The change in Revenue's approach will have been influenced by the scale of such adjustments in recent years, particularly at a time of falling Exchequer tax receipts due to the economic slowdown.
Accordingly, to the extent that you anticipate the need to seek a correlative adjustment as a result of an ongoing dispute with another jurisdiction, it will be important to factor into the overall process, the need to engage at an early stage with Irish Revenue.
For more information, please contact,
John M. Kelly
Partner, European pharma & life sciences tax leader
Telephone: +353 1 7926307