Austria Updates Transfer Pricing Guidelines21st October 2021
Hard to believe, but the last time Austria updated its transfer pricing guidelines was way back in 2010—that is, until last week when the Austrian Ministry of Finance published new guidelines, effective immediately, to incorporate the OECD’s BEPS initiative. (A little late to the party, Austria, but better late than never.) What do the new guidelines include? A lot—here are just a few of the greatest hits: First, Austria has added guidance on the importance of economic circumstances and substance. Economic substance must be delineated, and profits must align with the value chain or transactions could be reclassified. While Austria still recognizes all OECD transfer pricing methods (as well as others), the new guidance does clarify how to use the transactional net margin method and the profit-split method appropriately. The Austrian tax authority allows for flexibility in terms of the interquartile range: Auditors will no longer automatically adjust to the median value if they determine the taxpayers price is outside the interquartile range; any value within the range works, if the taxpayer proves more reliable than the median. Year-end adjustments have been clarified—they are only acceptable if terms have been agreed to beforehand. Austria has also updated guidelines on routine service transactions—now in line with the EU Joint Transfer Pricing Forum report, mark-ups between 3% and 10% may be applied. Taking cues from the OECD’s simplified approach, low value-adding services can be treated with straightforward mark-ups of 5%. Now financial transaction guidance is in line with the OECD’s new Chapter X guidance, and an analysis of DEMPE functions will be required for transactions involving intangible assets. The changes to Austria’s transfer pricing regime aren’t exactly groundbreaking, but taxpayers with entities in Austria would be wise to re-evaluate their transfer pricing policies and planning.