Transfer pricing - Austria

• Austria’s material transfer pricing (TP) legislation can predominantly be found in the Income Tax Act (ITA), § 6 para 6, and is based on the arm’s length principle as per Article 9 of the OECD Model Tax Convention on Income and Capital, ie it follows the OECD Guidelines. The rules are not heavily formulaic but instead are principles-based.
• The filing of transfer pricing documentation with the ATA is not mandatory outside the scope of the Transfer Pricing Documentation Act (TPDA; see below the chapter on Transfer Pricing Documentation for further details), but because of the self-assessment regime, transfer pricing analysis and documentation (according to the general principles of the Federal Fiscal Code [FFC]) is required to avoid unfavorable adjustments in the course of a tax audit by the ATA.
• Within the scope of the TPDA, the preparation of transfer pricing documentation (Master File and Local File) as well as the preparation and filing of a Country-by-Country Report (“CbCR”) or CbCR notification is mandatory.
• Transfer pricing documentation prepared in line with the TPDA must be submitted upon request of the competent tax office within 30 days after the constituent entity files its tax return; hence, the deadline for submission of a transfer pricing documentation is 30 days after filing the tax return of the respective year (no statutory deadline). Additionally, there are no specific returns related to transfer pricing, that must be filed along the annual tax returns.
• Further, the CbCR must be filed electronically within 12 months after the end of the respective financial year. If the Austrian entity is not obliged to file a CbCR, it needs to inform the competent tax office about the identity and residence of the reporting entity by the last day of the financial year for which a CbCR must be filed (“CbCR notification). For financial years beginning after 31 December 2021, no CbCR notification must be filed if there are no changes from the previous year. Non-compliance with the filing obligations regarding CbCR or CbCR notification may lead to penalties.

• Austria’s transfer pricing rules generally follow the OECD Guidelines. The Guidelines, updated in January 2022, are not mentioned in Austrian legislation, but form the basis for the Austrian Transfer Pricing Guidelines (ATPG 2021, which form a publicly available, non-binding guidance that wants to ensure uniform interpretation of TP through tax audits and therefore for taxpayers as well).
• The ATPG 2021 explicitly state that due to Art 31 Vienna Convention on the law of treaties, the OECD Guidelines (in their function of providing guidance on the interpretation of Double Tax Treaties), include a binding guidance on the interpretation of the arm’s length principle. Dynamic interpretation is to be applied in this context. However, it has to be seen that, as mentioned above, the ATPG themselves are non-binding. Still, the OECD Guidelines are of course very important in practice.
• The OECD has also released further guidance which are also of relevance from an Austrian point of view. Finally, Austria also follows the Authorized OECD Approach (AOA) “Light” for the profit appropriation to branches / permanent establishments.
• Additionally, the ATPG 2021 have been revised in 2025 (“Wartungserlass 2025”). The revised ATPG takes the latest work of the OECD as well as current national and international case law into account.

• The most appropriate pricing method should be selected on a transaction-by-transaction basis, providing the most reliable measure of an arm’s length result in each case. The current OECD methods, namely the comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split methods are all accepted, but the method used must be in line with the functional and risk profile of the entity. Other methods can also be used if justifiable and appropriate.
• There is no set hierarchy as the ATPG 2021 refer to the methods of the OECD Guidelines. In practice, however, a ‘natural hierarchy’ favors the comparable uncontrolled price method, if reasonably applicable. This can also be derived by the order in which the transfer pricing methods are mentioned in the ATPG.

• The TP rules apply to Austrian taxpayers, including Austrian branches of foreign companies and there is a self-assessment regime, ie in principle, the onus is on the taxpayer to confirm its transfer pricing meets the standard or to adjust its tax return accordingly. However, once there is proper TP documentation shared with the Austrian Tax Authorities (ATA) (either due to mandatory transfer pricing documentation or due to document requests by the ATA based on the FFC), the onus is on them to prove that the transfer prices used are not at arm’s length. 

• Austria accepts the OECD transfer pricing documentation model based on the Master File and Local File approach. This approach is considered best practice in Austria. If the thresholds for the TPDA (see below) are not fulfilled, filing a CbCR-Report / Master File and Local File is not mandatory, but can be done to fulfill the general documentation obligations according to the FFC. Those state that the documentation must be able to “provide an expert third party with an overview of the business transactions within a reasonable period of time” (without defining this reasonable period of time, hence this may depend very much on the facts and circumstances as well as the complexity of each case).
• Lack of carefully prepared documentation will generally be seen as (at least) “careless” behavior. In those cases, the ATA might have the power to estimate the tax basis.
• Transfer pricing documentation according to the TPDA and the FFC can be set-up in both, German and English language considering the ATPG 2021. For FFC-based documentations It might be necessary to translate parts of the documentation in German language upon request.

• Austria introduced CbCR (Country by Country Reporting) and Master File / Local File regulations in accordance with the EU-Directive 2016/881 and the multilateral intergovernmental agreement on the exchange of country-by-country reports. Those are regulated in the TPDA. The regulations are effective for fiscal years starting on or after 1 January 2016. The content of the Master File and Local File is extensive regulated within the implementation regulation of the TPDA and should usually include the following.
  
  Master File:
  • organizational structure of the multinational group of companies,
  • description of the business activities,
  • documentation of intangible assets,
  • documentation of the Group's internal financial activities, and
  • documentation of financial assets and tax positions.

Local File:

• • a background to the company incl a group structure,
  • an outline of the key intercompany transactions under analysis,
  • an analysis of the key functions, assets and risks of the company,
  • an industry analysis
  • an economic analysis including supporting evidence such as comparables, and
  • financial information of the business unit
• The key is that the transfer pricing documentation explains the value creating activities and the management of risk in the group and shows that the policies are at arm’s length.
• The threshold for the obligation to file a CbCR or CbCR-notification is a group revenue over €750m in the preceding business year. The threshold for the obligation to prepare a Master File and Local File is revenues over €50m in the two preceding business years.
• If ATA requires transfer pricing documentation according to the TPDA, the taxpayer will typically have a deadline of 30 days to respond (see already above).
• Transfer pricing documentation must be preserved at least seven years from the end of the accounting period.

• High risk business models include commissionaire and toll manufacturing.
• Limited risk distributor and contract services / contract R&D arrangements could also potentially be affected, especially where significant people functions are in Austria.
• Persistent losses in a “low risk” entity
• Licensing payments to low tax jurisdictions (which are not tax deductible according to the Corporate Income Tax Act)
• Business restructurings, or changes in TP model, can also trigger a challenge but businesses can evolve, and if the previous TP method no longer appears the most appropriate, it should always be reviewed, rather than being ignored for the sake of maintaining consistency.

• Non-compliance with the obligation to file a (correct) CbCR or late filing may be subject to a penalty of up to € 25k in case of gross negligence and up to € 50k in case of intention.
• There is no penalty for the non-compliance with non-mandatory transfer pricing documentation. However, non-compliance with the obligation to disclose information that is relevant for the assessment of taxes according to the FFC to the ATA upon request may be subject to a penalty of up to € 5k.
• Furthermore, in case of a lack of sufficient TP documentation, the ATA have the power to make estimates of the tax basis. Those estimates do not have the characteristics of a penalty but might still be unfavorable for the taxpayer.
• Additional penalties might arise in case of TP adjustments.