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Documentation and reporting
Rules and procedures
What rules and procedures govern the preparation and filing of transfer pricing documentation (including submission deadlines or timeframes)?
Special rules are set out in the Transfer Pricing Documentation Act, which was drafted on the basis of the Organisation for Economic Cooperation and Development (OECD)/G20 Base Erosion and Profit Project (see the OECD final report of October 5 2015 relating to Action 13 "Transfer pricing Documentation and Country-by-Country Reporting").
Austrian enterprises with an annual turnover of over €50 million that are part of a multinational group of companies must keep both a master file and a local file. Austrian enterprises that must submit a country-by-country report must submit the report electronically using the standardised forms to the Austrian Tax Office of the Austrian company responsible for the report within 12 months of the end of the accounting year (Section 8(1) of the Transfer Pricing Documentation Act).
For smaller multinational enterprises, the general rules of the Austrian tax system for documentation are applicable.
What content requirements apply to transfer pricing documentation? Are master-file/local-file and country-by-country reporting required?
Austrian group companies submitted to the Transfer Pricing Guidelines Act with an annual turnover of over €50 million in two consecutive years (or €5 million of commission fees from the principal) must file the master file and/or their local file directly with the tax administration if so required by the competent tax authority.
As far as the contents of the master file are concerned, an Austrian ordinance based on the Transfer Pricing Documentation Act follows the description contained in Annex I to Chapter V of the OECD Transfer Pricing Guidelines. Annex II to Chapter V of the OECD Transfer Pricing Guidelines describes which core information is expected to be found in the local file.
Large multinational enterprises with a consolidated group revenue of at least €750 million must take part in the country-by-country reporting for accounting periods beginning on or after January 1 2016. In general, the ultimate parent company of the multinational must file, on an annual basis, the standardised country-by-country report with its tax administration, which then distributes it to all participating jurisdictions where entities of the mulitinational have been set up. The Ministry of Finance must communicate the information contained in the country-by-country reports at the latest 15 months after the last day of the relevant accounting year. The first communication must be made within 18 months after the end of the first accounting year starting on or after January 1 2016 (by June 2018 for an accounting period ending December 31 2016). The participating jurisdictions are listed on the OECD website at www.oecd.org/tax/automatic-exchange/about-automatic-exchange/CbC-MCAA-Signatories.pdf.
If the ultimate parent company is not legally obliged to file a country-by-country report in its country of residence or the residence country is not a participating jurisdiction or a ‘systematic failure’ in submitting country-by-country reports occurs, the Austrian tax administration may request, by formal decree, that an Austrian entity belonging to the multinational take over the filing responsibility for the multinational, unless another entity of that multinational is prepared to replace the ultimate parent company with regard to the filing obligation (Section 5 of the Transfer Pricing Documentation Act).
What are the penalties for non-compliance with documentation and reporting requirements?
Deliberate non-compliance with the reporting requirements under the country-by-country regime (failure to submit a report or submitting a report with incorrect information) is a punishable offence and entails pecuniary punishment of up to €50,000 (Section 49(b)(1) of the Financial Criminal Act). Non-compliance because of gross negligence is punishable by fines up to €25,000 (Section 49(b)(2) of the Financial Criminal Act). The same applies where mandatory information (under Annexes 1,2 and 3 of the Austrian Transfer Pricing Documentation Act) is missing or incorrect.
What best practices should be considered when compiling and maintaining transfer pricing documentation (eg, in terms of risk assessment and audits)?
As a general rule, all taxpayers are required by law to keep sufficient documentation demonstrating in a clear-cut manner that they have complied with the tax law. This requirement also applies to transfer pricing cases, without the need to spell it out in the law specifically. Therefore, unless specific documentation rules are set out by law (as in the case for large multinationals in the Transfer Pricing Documentation Act), all taxpayers carrying out cross-border transactions with related companies should assess themselves whether:
- their commercial behaviour is at arm's length (as required in Section 6(6) of the Income Tax Act); and
- they have sufficient documentation evidence to that effect.
Obvious compliance with the Austrian Transfer Pricing Guidelines and the OECD Transfer Pricing Guidelines should be a key goal in that context. Careful documentation is of greatest importance whenever a particular type of business operation carries the risk of profit shifting into low or no-tax jurisdictions (be that directly or indirectly by applying stepping-stone strategies via high-tax countries) and, therefore, might have been earmarked for risk-oriented audit programmes of tax authorities.
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