Posted: 21 Feb. 2022 6 min. read

Austrian Transfer Pricing Guidelines 2021 Part 6 – Transfer Pricing Documentation and Audits

Overview

To conclude our series of articles on the new Austrian Transfer Pricing Guidelines (Austrian TPG 2021), this article will take a closer look at some of the important changes in the area of transfer pricing documentation and transfer pricing audits.
 

Transfer pricing documentation

The Austrian TPG 2021 clarify that the documentation of an intra-group transaction must be prepared at the time of the transaction or, at the latest, by the time the tax return for the financial year in which the transaction took place is prepared and filed. The extent of the documentation always depends on the performed service. The more difficult a performed service is to ‘grasp’, the more precise the service description should be. Transfer pricing documentation that complies with the provisions of the Austrian Federal Fiscal Code and the pertinent standards for transfer pricing is presumed to be proper and is to be used as the basis for levying taxes. The tax authorities bear the burden of proof that the transfer prices do not comply with the arm's length principle. If, on the other hand, the records show material or formal deficiencies, then, according to the Austrian TPG 2021, the tax authorities might be entitled to estimate the tax basis. Since transfer pricing cases are regularly cross-border, the Austrian TPG 2021 also point out that the taxpayer therefore has an increased duty of cooperation.

In addition, the Austrian TPG 2021 specify the minimum content that the tax authorities expect of a transfer pricing documentation that does not fall under the Austrian Transfer Pricing Documentation Act (TPDA). Business entities which do not exceed the revenue thresholds of the TPDA are generally not required to follow the structure specified by the TPDA (local file, master file, CbC report). However, the Austrian TPG 2021 nevertheless require the provision of comparable minimum information for a transfer pricing documentation outside of the TPDA. While it is stated that the specific scope of documentation will depend on the scope of the business activity, the complexity of the respective facts and the business sector, any transfer pricing documentation should nonetheless at least contain the following information:

  • General information about the associated enterprises (e.g. organizational chart, shareholdings, etc.);
  • Description of the intercompany transaction;
  • Integration of the domestic company into the group's value chain;
  • Functional and risk analysis;
  • Verification of the arm’s length nature of the transfer prices;
  • Written contracts concluded in advance for the transactions.

This documentation – like the documentation pursuant to the TPDA – can in principle be prepared in English. However, a German translation may be requested by the tax authorities if there is a special need for it in the relevant investigation procedure.

The Austrian TPG 2021 also incorporate the previous content of the letter of information by the Austrian Ministry of Finance on the TPDA. In deviation from the previous letter of information, the Austrian TPG 2021 now state that for reportable financial years beginning after 31 December 2021, the filing of a CbC notification is only required if there are changes compared to the notification submitted in the previous year (e.g. if the ultimate parent entity changes or the reporting obligation is no longer assumed). The end of association to a group that is required to file a CbC report needs to be reported by means of a blank report.

With regard to database studies, the Austrian TPG 2021 state that it is sufficient if they are renewed every three years – i.e. a new search for comparables is carried out – provided that the conditions of the business activity have not changed. However, it must be ensured that continuous data is used so that there are no gaps in the data series and no individual years are left out from consideration. Contrary to the requirements in the OECD TPG 2017, an annual update of the financial data of the comparables of the database study is not required.

Transfer pricing audits

The new Austrian TPG 2021 specify in more detail which documents must be submitted by a taxpayer so that a transfer pricing adjustment made by a foreign tax authority is taken into account ex officio unilaterally – ie without a mutual agreement procedure – in Austria (corresponding, primary adjustment). These are: evidence of the factual correctness of the correction, precise description of the facts, taxation period concerned, tax assessment basis concerned and information on any relevant legal remedies. The Austrian tax authorities must also obtain information from the taxpayer to ensure that there is no double non-taxation (e.g. legally binding foreign tax assessment notices).

Furthermore, the Austrian TPG 2021 provide that a hidden distribution or hidden contribution in connection with a transfer pricing adjustment must always be examined if a transfer pricing claim of a domestic company is not recognized as a liability by the associated foreign enterprise (secondary adjustment). The recognition of the liability can be substantiated, for example, by a declaration of acceptance signed by the foreign associated enterprise (the Austrian TPG 2010 still required the submission of a repayment schedule).

Conclusion

The statements in the new Austrian TPG 2021 on the requirements for a proper transfer pricing documentation includes positive and negative points. On the one hand, the requirements for updating database studies are welcomed from a practical perspective and confirm previous practice. Likewise, the listing of relevant documentation requirements for companies that do not exceed the threshold of the TPDA is, in principle, also helpful. At the same time, however, these documentation requirements are sometimes formulated broadly. It remains to be seen how extensive the required documentation will eventually have to be from the perspective of the tax authorities. In any case, it is to be hoped that the submission of a German translation of a documentation prepared in English will not be requested in practice. In the area of transfer pricing audits, the Austrian TPG 2021 contain welcome clarifications. No significant deviations from the previous handling are discernible.


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Dr. Florian Navisotschnigg, BSc (WU)

Dr. Florian Navisotschnigg, BSc (WU)

Senior Assistant Steuerberatung

Florian Navisotschnigg ist in der Steuerberatung im Transfer Pricing Team bei Deloitte Wien beschäftigt. Dabei berät er multinationale Unternehmen bei verrechnungspreisspezifischen Fragestellungen.

Daniel Gloser, MSc (WU)

Daniel Gloser, MSc (WU)

Senior Assistant Tax | Deloitte Österreich

Daniel Gloser ist seit 2017 Berufsanwärter in der Steuerberatung bei Deloitte. Als Teil des Verrechnungspreis Teams unterstützt er in der Beratung von multinational agierenden österreichischen Unternehmen und österreichischen Geschäftseinheiten ausländischer Unternehmensgruppen. Der Tätigkeitsumfang reicht hierbei von der Erstellung über die Dokumentation bis hin zur Verteidigung von Verrechnungspreissystemen in Außenprüfungen.