Posted: 18 Nov. 2021 7 min. read


As part of our series of articles on the new Austrian Transfer Pricing Guidelines (Austrian TPG 2021), the purpose of this article is to take a closer look at material changes in the area of intra-group transactions - in particular on the topics of intra-group services and cost contribution arrangements.

Intra-group services - "New" mark-up on routine services and introduction of the LVAIGS approach

The Austrian TPG 2010 still provided that for routine services - without the existence of a benchmarking study - an arm's length gross profit mark-up between 5-15% could be used as guidance. According to the new Austrian TPG 2021, it is permissible if a net profit mark-up between 3% and 10% (often 5%) - in line with the statements of the EU Joint Transfer Pricing Forum - is used for routine services. It should be noted, however, that this is not a range within any value is considered to be at arm's length. Instead, it must always be assessed in every individual case which profit mark-up within the range shall be selected. For routine services rendered before 1 January 2022, a gross mark-up between 5% and 15% can still be used. A net mark-up corresponds to the actual net profit of a service provider generated from a transaction. Therefore, all costs of the service provider are included in the cost base. Thus, the cost basis includes appropriate portions of selling, general and administrative expenses. In contrast, with gross mark-ups, administrative, general and selling costs still have to be covered, so only directly attributable costs of providing the service are included in the cost base.

In addition, for low value-adding services, a simplified application of the arm’s length principle under the Low Value-Adding Intra-Group Services approach (LVAIGS approach), known from the OECD TPG 2017, has been adopted. Under the LVAIGS approach, it is possible to assess whether the recipient of the service obtains a benefit from the use of the service based on service categories instead of - as it is usually required - for each individual service charge (simplified "benefit test"). Moreover, a cost pool should be established for each category of service, which should include the direct and indirect costs as well as an appropriate share of the general administrative costs associated with the category of service in question. The cost pool should further include only services provided to more than one company. A fixed net cost mark-up of 5% is applied to the cost base thus determined, excluding pass-through costs.

Among others, the following activities are eligible for the LVAIGS approach:

  • Accounting and auditing
  • HR
  • IT
  • Tax and legal advice within the group
  • General administrative services.

Among others, the following activities are not eligible for the LVAIGS approach:

  • Services constituting the core business of the MNE group
  • Research and development services
  • Manufacturing and production services, including related purchasing activities
  • Sales, marketing and distribution activities
  • Management Services.

Cost contribution arrangements - Novelties with regard to participation and allocation

Cost contribution arrangements (CCAs) are contractual arrangements between related companies to share the contributions and risks associated with the joint development, production or procurement of intangible assets, tangible assets (development CCAs) or services (service CCAs), where the intangible assets, tangible assets or services concerned are expected to generate benefits for all CCA participants. The remuneration sought by the participants in the CCA thus consists, in whole or in part, of the reciprocal and pro rata benefits they expect to derive from the pooling of their resources and skills.

The Austrian TPG 2021 clarify that participants in a CCA can only be companies that can expect to benefit from the CCA activities and that they are entitled to a share of the result of the CCA. In addition, an entity must be able to exercise control over the risks associated with the CCA and have the financial capacity to assume those risks. In contrast, an entity which merely provides financing cannot be a member of a CCA.

The services purchased by the CCA participants must be (reciprocally) provided by and for themselves. In addition, they can also receive services from a company outside of the CCA. If the company outside of the CCA is a related company, then it must be remunerated in accordance with the arm's length principle. On the other hand, a pure "demand pool", in which the pool participants do not make any contributions themselves and only jointly purchase a service from a company outside of the pool, does not meet the criteria for establishing a CCA.

The valuation of contributions in a CCA has also changed significantly. As a matter of principle, contributions must now be valued with market prices and not - as was previously the case - only at cost. Pure cost allocation is now only permissible if the difference between the market value and the cost of the contribution is comparatively insignificant, as will be the case, for example, for low value-adding services.

If, on the other hand, a CCA participant contributes pre-existing (intangible) assets, they must in any case be recognized at their market value at the time of the contribution whereas a cost-based calculation does not provide a reliable basis for the application of the arm's length principle. As the value of each CCA participant's relative share of the contributions must be consistent with its share of the expected benefits, compensation payments may be required. The contributions and the expected benefits must always be considered over the entire term of the CCA (if necessary, also over the period of more than one business year).

Financial transactions

In the course of updating the Austrian TPG, the entire chapter on financial transactions has been revised and adapted to the OECD guidance on financial transactions. Therefore, we may refer to our series of articles on this topic for further details about financial transactions.


The changes in the new Austrian TPG 2021 regarding intra-group transactions are a desirable and important alignment with the OECD TPG 2017. It remains to be seen how concepts such as the LVAIGS approach will prove themselves in practice in tax audits. However, it is clear that the requirements for a transfer pricing analysis of intra-group services have increased significantly. This is accompanied by significantly increased documentation requirements for the taxpayer. The switch to the market value concept for cost contribution arrangements will significantly complicate their application in practice for the joint development of intangible assets since complex valuation considerations are now necessary in the event of entry, exit or change in the expected benefit of the CCA participants.

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Mag. Karin Andorfer

Mag. Karin Andorfer

Partner Steuerberatung | Deloitte Österreich

Karin Andorfer ist Partnerin in der Steuerberatung bei Deloitte in Wien. Sie ist Steuerberaterin und betreut zahlreiche nationale und internationale Klienten in verschiedenen Branchen. Ihre Tätigkeitsschwerpunkte liegen insbesondere in den Bereichen der nationalen und internationalen Steuerberatung sowie im Bereich Transfer Pricing / Verrechnungspreise.