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Advance pricing agreements
Availability and eligibility
Are advance pricing agreements with the tax authorities in your jurisdiction possible? If so, what form do they typically take (eg, unilateral, bilateral or multilateral) and what enterprises and transactions can they cover?
As far as unilateral measures are concerned, taxpayers can obtain an informal tax ruling that provides protection on a good-faith basis. Since 2011 taxpayers have also been able to apply for a legally binding advanced tax ruling that determines an appropriate set of criteria (eg, transfer pricing method, appropriate adjustments etc) with respect to transfer pricing matters. Such rulings are unilateral (ie, with no involvement of the tax authorities of other treaty states) and are based on the facts and circumstances presented by the taxpayer prior. Within the European Union, such rulings must be communicated in the frame of a mandatory automatic exchange of information system to all other member states, as well as to the European Commission.
On the basis of double taxation conventions (DTC), which contain a provision that reflects Article 25(3) of the Model Tax Convention of the Organisation for Economic Cooperation and Development (OECD MTC), cross-border advance pricing arrangements can be negotiated by the Ministry of Finance on a bilateral or multilateral basis. Within the European Union, the outcome of such arrangements is also subjected to a mandatory automatic information exchange system. However, the advance pricing arrangements should clarify specific issues of interpretation of double tax treaties (including fact patterns) on a rather generic level (see more on this in the answer to “What rules and procedures apply to advance pricing agreements?”).
Rules and procedures
What rules and procedures apply to advance pricing agreements?
Advance pricing arrangements are generally based on provisions of the relevant DTC, corresponding to Article 25(3) of the OECD MTC (see Explanatory Note 17 on Section 2(1) of the EU Taxation Act 2016), and are therefore not initiated formally by the taxpayer. Furthermore, such arrangements are not specifically based on, or restricted to, the specific facts of a taxpayer's individual tax case. Such agreement procedures are initiated by the competent authority of the DTC (in Austria: the Federal Ministry of Finance). Therefore, such procedures disclose neither names of taxpayers nor facts and circumstances of an individual tax case. They focus only on getting an international agreement on how discovered transfer pricing problems can be solved on a general level in a coordinated manner. Because advance pricing agreements are treated in this rather abstract manner, they can released publicly. Of course, taxpayers that seek clarity for their own individual tax case may request that the competent authority contact the competent authority of the treaty partner in order to reach the desired agreement on the contested interpretation of the relevant DTC under the consultation procedure based on Article 25(3) of the OECD MTC.
How long does it typically take to conclude an advance pricing agreement?
For informal rulings and advance pricing arrangements, the duration is highly dependent on facts and circumstances. It may take several months to obtain an advance cross-border ruling.
What is the typical duration of an advance pricing agreement?
As facts and circumstances vary from case to case, a ‘typical’ duration cannot be ascertained. Unless otherwise stated in an individual agreement, there is no expiry date to an advance ruling.
What fees apply to requests for advance pricing agreements?
In case of agreements between the taxpayer and the Austrian Tax Office in the form of advance cross-border rulings, the fee is highly dependent on the size of the taxpayer's annual turnover. When the turnover exceeds €400,000, the basic amount of €1,500 is gradually increased up to a maximum of €20,000 for a turnover of €40 million. The tax authorities do not charge any administrative fee for the issuance of informal rulings and advance pricing arrangements.
Are there any special considerations or issues specific to your jurisdiction that parties should bear in mind when seeking to conclude an advance pricing agreement (including any particular advantages and disadvantages)?
The fees for an advance cross-border ruling become due in any case, even if the tax authorities completely reject the appropriateness of the taxpayer's legal opinion. Advance cross-border ruling decrees can be appealed to the Federal Tax Court, as any other decree of the Tax Office.
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