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The Austrian Transfer Pricing Guidelines 2010; Useful or useless?

By Imke Gerdes
Posted: 1st September 2011 09:37

In October 2010, the Austrian Ministry of Finance published the first domestic transfer pricing guidelines (“TP Guidelines”), which were awaited by practitioners for a long time.  A first draft that was circulated for comments however, foreshadowed that the TP Guidelines would not be as helpful as experts had hoped for.  This article aims at giving a very brief overview on the legal status of the TP Guidelines as well as the major differences to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD Guidelines”).

1. Legal situation in Austria prior to October 2010

Before the launch of the TP Guidelines, Austria relied on the OECD Guidelines.  They had been published in a German translation as a decree and were therefore, used by tax administrations as a means of interpretation.  Because Austrian legislation does not have comprehensive rules on transfer pricing, the OECD Guidelines were an important means for both, tax administrations and tax payers.  Since they did not have the status of a law, they were not legally binding though. Apart from the OECD Guidelines, transfer pricing issues were also influenced by opinions issued by the Ministry of Finance on a case by case basis in the course of the so called Express Answering Service (“EAS decisions”) as well as by case law of the Federal Administrative High Court and the court of first instance, the Independent Fiscal Senate.  A consistent opinion of the tax administrations however, was missing.  This could lead to the situation that transfer pricing cases were handled differently in Vienna and Salzburg.

  2. Legal situation in Austria after October 2010

Similar to the OECD Guidelines, the TP Guidelines were issued as a decree.  This means that they are binding on the tax authorities as a means of interpretation, however, they are not binding on the tax payer and the courts.  The relationship between the TP Guidelines and the OECD Guidelines is not entirely clear but might be derived from the goal the Ministry of Finance wants to achieve with the TP Guidelines.

The TP Guidelines mention as one main goal to provide a comprehensive overview on the current Austrian practice on resolving transfer pricing issues and to ensure and alleviate the domestic application of the OECD Guidelines.  Accordingly, the TP Guidelines are a summary of certain aspects of the OECD Guidelines, the OECD Report on the Attribution of Profits to Permanent Establishments, prior EAS decisions, domestic case law and case law of the German Fiscal High Court.  Experts view this as an indication that current or future OECD Guidelines prevail over the TP Guidelines in case of differences. The second main goal is to combat the shift of income to low tax countries by applying abusive transfer prices or structure.

The TP Guidelines are divided into five chapters, one chapter being devoted to permanent establishments and another chapter elaborating on abusive structures.  The other chapters concern multinational corporate structures in general, a surprisingly short statement on documentation requirements and field audits.

3. Important statements of the TP Guidelines

In the following, only the most important statements of the TP Guidelines shall be addressed.

When determining which transfer pricing method to apply, the TP Guidelines state that that method shall be applied which grants the greatest certainty to reach at an arm’s length price.  In compliance with the OECD Guidelines the traditional and the transactional methods may be applied, however, if a traditional method is equally appropriate, it should prevail.  The criteria for which method to choose seems to deviate from the OECD Guidelines which mention that the most appropriate method shall be applied.  However, given the goal of the TP Guidelines to help applying the OECD Guidelines in a consistent manner, it can be assumed that the Ministry of Finance will adhere to the most appropriate method approach and did not mean to introduce a new approach.

One major and crucial difference to the OECD Guidelines however, is the Ministry of Finance’s opinion on adjustments.  In general, the TP Guidelines stipulate that any price that is within the range is a suitable and appropriate price meeting the arm’s length standard.  However, where a price falls outside the range, a mandatory adjustment to the median has to be made.  This approach copies the German situation, where such an adjustment is codified by law after the German Fiscal High Court rejected this approach if not stipulated by law.  Because Austrian law does not stipulate such an adjustment to the median, it is neither covered by Austrian law nor by the OECD Guidelines.

Another difference to the OECD Guidelines is the Austrian view on retroactive adjustments if a cost plus method based on budgeted costs is applied. According to the OECD Guidelines, retroactive adjustments based on actual costs are only permissible if unrelated third parties would have agreed to an adjustment as well.  The TP Guidelines however state as another exception if there is no sufficient written evidence justifying the calculation of the budgeted costs, because tax payers should have to accept retroactive adjustments if current and timely documentation is missing.  The latter statement clearly infringes the OECD Guidelines.

 4. Result

So what is the benefit of the TP Guidelines?  In certain aspects, the Ministry of Finance takes a more rigid approach than the OECD Guidelines, but in general, the TP Guidelines are in line with the latter.  It is a pity that the Ministry of Finance did not take the opportunity to give some more detailed guidance on documentation requirements, which are addressed on only six pages, but spent just as much on abusive structures, which basically is not a transfer pricing question.  Whether or not a structure is abusive has to be answered based on domestic and possibly European law and if a structure is held abusive, it will simply be disregarded.  It would also have been beneficial if the TP Guidelines had addressed the newly introduced possibility to obtain a binding ruling.

However, the benefit of the TP Guidelines is that tax administrations throughout Austria now have a “handbook” according to which they have to address certain issues.  This gives tax payers planning certainty to some extent enabling them to prepare for tax audits accordingly.  The latter is especially important because Austrian tax administrations approach transfer pricing issues more and more aggressively.  Nowadays, tax audits will always address transfer pricing issues if applicable and a specially trained auditor will be involved.  Therefore, a thorough audit preparation is vital and the TP Guidelines can help the tax payer with this.


Imke Gerdes has been with Baker & McKenzie Diwok Hermann Petsche since 2003 and is highly experienced in tax law. Ms. Gerdes is one of the few Austrian lawyers qualified as a lawyer and tax advisor ("Steuerberater"). She currently serves on the Steering Committee of the Firm’s Wealth Management Practice Group, and is head of the Global Equity Organization in Austria. Ms. Gerdes is a member of the International Fiscal Association, the German and Austrian Bar Association, the Austrian Chamber for Tax Advisors, as well as of the Society of Trust and Estate Practitioners (STEP). 

 Imke can be contacted on + 43 1 24 250 468 or by email at


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