New Austrian Transfer Pricing Guidelines 2021

On 7 October 2021, the Austrian Federal Ministry of Finance published the final version of the Austrian Transfer Pricing Guidelines (Austrian Guidelines 2021). In 2010, the Austrian tax authorities published the transfer pricing guidelines based on the OECD Guidelines from 2010 for the first time. The recent changes are mainly due to international developments as a result of the OECD’s Base Erosion and Profit Shifting (BEPS) project and the subsequent OECD update of the transfer pricing guidelines in 2017 (OECD Guidelines 2017).

The recent revision should serve as an aid for the interpretation of the arm’s-length princi­ple which is laid down in Article 9 of the Double Taxation Treaties and in par. 6 (6) (a) of the Austrian Income Tax Act. The structure of the Austrian Guidelines 2021 is divided into five parts:

Part 1: Multinational group structures

Part 2: Multinational permanent establishment structures

Part 3: Documentation and reporting requirements

Part 4: Transfer Pricing audits

Part 5: Appendix with reference documents (Austrian Federal Ministry of Finance; OECD and EU)

The main changes of the Austrian Guidelines 2021 are listed below:

• The main changes based on BEPS have been transferred: risk analysis, DEMPE concept, value creation considerations, profit split method, chapter X (financial transactions), OECD concepts “hard-to-value-intangibles” as well as “low value-adding intragroup services”, and chapter IX on group structure.
• Intra-group services may only be charged if an independent enterprise would pay for the service or provide itself. This so-called benefit test is now expressly included in the Austrian Guidelines 2021 (Rz 87).
• Furthermore, the Austrian Guidelines 2021 validate that the cost-plus method with a net profit mark-up within 3% to 10% will often be used for intra-group routine services. This new net profit mark-up will be applied from 1 January 2022 (see Rz 90). To simplify, low-value-adding intra-group services should be valued at a cost mark-up of 5% (Rz 95).
• The year-end adjustment has been reworded in a restrictive way – existing agreements must be adjusted accordingly. In particular, monitoring during the year is necessary to prove that an adjustment during the year is not possible (Rz 73).
• It is no longer required to carry out a compulsory median correction as part of the net margin calculation. Only if it can be demonstrated that a particular value within the range is the most reliable, this value can be used (Rz 75).
• The cost contribution agreements were significantly restricted (Rz 159 ff).
• The documentation requirements of small and medium-sized enterprises were adapted to those of large enterprises (Rz 412).
• The annual update of the financial data of the database study is no longer required, provided that the conditions of business activity haven’t changed. It is sufficient to renew the database studies every three years (Rz 426).
• Documentation like the Master File, Local File and Country-by-Country Reporting (CbCR) and contracts, which are written in English, have no longer been translated into German (Rz 431).
• The annual CbCR notification requirement does not apply to fiscal years after 1 January 2022 if there have not been any changes compared to the notification submitted in the previous year (Rz 447).

Read the WTS Global Transfer Pricing Newsletter here.