The following article on the new Transfer Pricing Guidelines 2021 (Austrian TPG 2021) is dedicated to the chapter on multinational permanent establishment structures and deals with the most important changes concerning this topic.
With regard to multinational permanent establishment structures, the Austrian TPG 2021 contain some clarifications as well as further explanations taking into account administrative practice and current developments.
In contrast to the Austrian TPG 2010, the Austrian TPG 2021 not only contain explanations on the attribution of profits in connection with construction and assembly permanent establishments, but also certain clarifications on definitions and time limits. Essentially, the tax authorities allow a broad interpretation of the terms "construction" and "assembly", which is largely in line with the OECD Model Commentary. With regard to the time limit, the respective double taxation agreement (DTA) is decisive. In principle, a period of 12 months is assumed, but deviating regulations may exist. In national law, on the other hand, the deadline is set at 6 months, which must be observed in particular in relation to countries with which no DTA has been concluded.
In view of the increasing flexibility and mobility of the place of work of employees, the legal opinion of the tax authorities with regard to home offices, which they have already presented in various EAS (Express Answer Service), has been incorporated into the Austrian TPG 2021.
Under Austrian domestic tax law and treaty law, permanent establishments can in principle be established not only by offices or production facilities located in Austria, but also by other fixed places of business of foreign companies. However, it is questionable whether fixed places of business of employees, such as apartments in which they work in their home offices, can also constitute permanent establishments.
The establishment of a permanent establishment requires, on the one hand, the employer's power of disposal over the fixed local facility and, on the other hand, a certain permanence. The power of disposal is interpreted very differently internationally. While some tax authorities do not usually consider employees' homes to be a permanent establishment due to the employer's lack of power of disposal, the Austrian tax authorities take the view that a de facto power of disposal exists simply by agreeing to perform work in the home office and that a permanent establishment can therefore exist.
With regard to permanence, the Austrian TPG 2021 provide for a threshold value of 25 % of the employee's total working time, below which permanence is not given yet. If, on the other hand, a threshold value of 50 % is exceeded, the activity in the home is explicitly classified as permanent. However, these thresholds are not derived from OECD statements, but are only the legal opinion of the Austrian tax authorities, which has already been presented in various non-binding statements in the past.
Furthermore, it should be noted that, irrespective of the above, certain circumstances may, in the opinion of the tax authorities, lead to the establishment of a permanent establishment in private residences of employees. In this context, for example, the use of the apartment as a contact point for customers or for customer meetings or similar professional appointments are mentioned.
Only a very limited number of Austrian DTAs service permanent establishments are included DTA. Nevertheless, they should not be completely overlooked, as the concept of a service permanent establishment is also provided for in DTAs with neighboring countries (eg with the Czech Republic). The tax authorities now devote a separate paragraph to the service permanent establishment in the Austrian TPG 2021.
Basically, the concept of service permanent establishments outlines permanent establishments of the service provider through a physical presence in the source state. However, the Austrian TPG 2021 state that Austria's right of taxation thus granted can only be exercised to a very limited extent, as Austrian tax law only provides for the withholding taxation of commercial and technical advice.
The so-called Authorized OECD Approach (AOA) describes the approach designed by the OECD for the allocation of profits to permanent establishments. Essentially, the application of the AOA leads to permanent establishments being treated in the same way as related entities. Full application requires the agreement of an article in DTAs that corresponds to the current version of Art 7 of the OECD Model Tax Convention. Since all DTAs concluded by Austria are based on an older version of Art 7 OECD-MA, the Austrian tax authorities only apply an "AOA light". This means that the AOA is only applicable with respect to the core activity of a company. This has been clarified again in the Austrian TPG 2021 and the guidelines have been supplemented with further explanations in this regard.
The tax authorities also recognize that states apply the AOA differently. For example, Germany fully implements the AOA. Based on this, taxation conflicts resulting from a divergent interpretation are not uncommon in practice. However, in this context, the tax authorities merely state that such conflicts are to be resolved by means of a mutual agreement procedure.
The updated Chapter 2 of the Austrian Transfer Pricing Guidelines largely sets out the already known legal views of the Austrian tax authorities. In addition to alignments with the OECD Model Tax Convention, it includes in particular the position statements of the Ministry of Finance and case law, which provide detailed interpretations.
The changes presented in this article are only those which, in our view, are of particular importance for operational practice, and therefore do not represent an exhaustive list of all changes.
Sabina Panekova ist in der Steuerberatung im Transfer Pricing Team bei Deloitte Wien beschäftigt. Als Teil des Verrechnungspreis Teams unterstützt sie in der Beratung von multinational agierenden Unternehmen. Ihre Tätigkeiten umfassen die Erstellung von Verrechnungspreisdokumentationen und der Beantwortung verrechnungspreisspezifischer Fragestellungen.
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.