New Austrian Law on transfer pricing documentation

Dr. Peter Wundsam

We would like to advise you of the Law on transfer pricing documentation (further referred to as LTPD), which is valid from August 2016 in Austria. This law introduces an extension of regulators for multinationals for the taxable period beginning from the 1st of January 2016.

After fulfilling the financial conditions below (the amount of income and or turnover), the following obligations can apply to your business. In accordance with the OECD, the LTPD requires one to establish the three-part documentation:

  1. Basic document (“Master file”): The “Master File” documentation describes the whole company’s group and its worldwide economic activity and its transfer pricing policy.
  2. National specifics document (“Local file”): The “Local File” contains information about specific commercial transactions of a given domestic subject.
  3. Country-by-Country Report (“CbCR” ): The “Country-by-Country Report” should apply information about the worldwide distribution of profits, taxes and economic activities in relation to the relevant multinational and business activities and list the companies of the multinational.

One is allowed to draw up the document in English.

What documentation is obligatory for your business?
The scope of obligatory documentation depends on the amount of the turnover:

The highest parent company draws up the account, the transfer of the obligation to draw up the CbCR to another Austrian subsidiary could be established under the conditions with the LTPD requests.
The company seated in Austria, which is higher or representing the parent company, is obliged to inform the Tax Office of this circumstance by the last day of the taxable period the account should be submitted in.

Deadlines for obligations of documentation
The company is obliged to propose the “Master file and Local file” after the request of the relevant Tax Authority within 30 days from the delivery of the request, in the case of the “Country-by-Country Report” the company has to propose the documentation within 12 months after the end of the observed year, without the call of the Tax Office. This deadline expires on the 31st of December 2017 at latest (for the reporting date of the 31st of December 2016), in the case of a different fiscal year, the deadline will be established in a similar way.

Establishments applying the sanctions according to the “Country-by-Country Report”
There are defined regulators applying the sanctions according to the “Country-by-Country Report” in the LTPD. The intentional non-submittal, or late submittal, or the incorrect submittal, is considered to be a crime and will be sanctioned with a fine up to the amount of 50000 EUR. The fine will be imposed by the Tax Criminal Office, not by the Court.

The “Master File and Local File”
The “Master File” contains information about the organizational structure of the multinational group and describes its economic activity. This description has to contain the description of the supplier chain, or the services chain of the five most offered products, or services.
The documentation of intangible assets and financial activity places the emphasis on the conscientiousness and retentive content. It is necessary to document the important values of the company and the basic arrangement and contracts.

The “Local File” describes the domestic business companies on the basis of the description of its management structure, economic activities and strategies, as well as important competition, etc.
Important ongoing transactions in the company are included, which are described on the basis of the different parameters. The documentation contains a comparative and functional analysis, description of the methods of transfer pricing, reasons for the selected method and summarises the important assumption for the appropriateness of using the method of transfer pricing.
Should the regulators of the LTPD have been applied from the beginning this year, from the 1st of January 2016, we recommend that you adjust the documentation of transfer pricing according to the new standards.

We will advise and support you during the drawing up or adjusting of your documentation of transfer pricing, especially the “Master File and Local File”. Should you have additional questions, we will help you. Do not hesitate to contact us.

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