Effective TP Legislation
Austria, a member of the OECD, adheres to BEPS provisions in its Transfer Pricing (TP) documentation requirements. In 2016, Austria enacted the Transfer Pricing Documentation Act (TPDA), aligning with OECD BEPS Action 13. This act imposes extensive TP documentation requirements on multinationals with Austrian entities, effective from the fiscal year commencing on or after January 1, 2016.
Before 2010, Austria lacked specific TP legislation. In 2010, the Austrian Ministry of Finance issued TP guidelines based on the OECD Transfer Pricing Guidelines. Although these guidelines are binding on tax authorities, they do not bind taxpayers or the courts. The OECD’s BEPS Project received substantial consensus from Austrian authorities in 2014.
Associated Party Criteria
In Austria, parties are considered associated if one company participates directly or indirectly in the management, control, or capital of another, or if both entities share common control. Ownership of 25% or more in the other party falls under TP rules. Additionally, the ITA’s Section 6(6) outlines criteria such as joint ownership, partnerships, substantial shareholding, and common management.
Austria does not require TP-specific returns with annual tax filings, but auditors may request related-party transaction summaries and TP documents during tax audits. Section 238 of the Austrian Commercial Code mandates disclosure of transactions with related entities. However, this requirement does not fully align with the arm’s length principle.
Austria accepts CFC rules and ATAD, defining low-taxed foreign subsidiaries or PEs as those with an ETR of 12.5% or less.
Binding Tax Rulings
Since 2011, Austria offers unilateral tax rulings on TP issues. These rulings are valid for 3 to 5 years and are binding for tax authorities when implemented as stated in the request. Fees for tax rulings depend on revenue and group membership.
Standard Corporate Audits
Austria lacks specific TP audit rules, applying standard corporate income tax audit practices. Auditors focus on TP aspects like business restructurings, loss-generating affiliates, and profit allocation along the value chain. While there’s no fixed audit frequency, large companies are audited regularly, typically every 4 to 6 years, covering three financial years.
Austria mandates TP documentation, including the Master File, Local File, and Country-by-Country Report (CbCR). Entities with revenues exceeding EUR 50 million in two preceding fiscal years must prepare these files. MNE Groups with consolidated sales of over EUR 750 million in the previous fiscal year must also prepare a CbCR. Reporting requirements align with OECD Action 13 and EU standards.
Austria considers industry-specific value drivers to assess profitability. Functional analysis evaluates significant activities and responsibilities related to intercompany transactions, tangible and intangible assets used, and risks assumed.
Utilizing OECD Guidelines
Austria follows the 2010 OECD Transfer Pricing Guidelines for methods like CUP, resale price, cost-plus, profit split, and TNMM, choosing the most suitable method for each situation.
Due to Austria’s size, limited domestic comparables are available. Pan-European data is often accepted for benchmarking, with benchmarks updated every three years. Legal agreements have less prominence, with the conduct of the parties taking precedence.
Financial statements must include related-party disclosures. Austrian law mandates sufficient documentation for tax returns, retaining relevant documents for 7 years, and up to 22 years for real estate activities.
Consequences of Non-Compliance
Non-compliance with TP regulations in Austria can lead to penalties, late payment interest, and tax credit interest. Penalties for not submitting required documents can be up to EUR 5,000, with potential increases for deliberate tax evasion. Late payment interest may be levied for a maximum of 48 months.
Requirements for Reporting
Documentation for Austrian tax authorities should be in German or English. Notification to tax authorities is required for MNE group constituent companies, specifying their role within the group.