AUSTRIA Law and Practice Contributed by: Raphael Holzinger, Matthias Jancura and Claudia Synek, Grant Thornton Austria
3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods Neither the TPDA nor any other Austrian tax act explicitly lists specific transfer pricing methods. How - ever, the ATPG catalogue the transfer pricing methods according to the OECD Guidelines. According to the principles of the ATPG, 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 prevailing OECD methods – namely, the compa - rable uncontrolled price, resale price, cost plus, trans - actional net margin and profit split methods – are all recognised. However, it is essential that the chosen method be aligned with the entity’s functional and risk profile. The application of alternative methods is per - missible, provided they are justifiable and appropriate. 3.2 Unspecified Methods As stated in 3.1 Transfer Pricing Methods , the appli - cation of alternative methods is permissible according to the ATPG, provided they are justifiable and appro - priate, as outlined in the OECD Guidelines. 3.3 Hierarchy of Methods There is no established hierarchy, as the ATPG align with the OECD Guidelines. However, in practice, a “natural hierarchy” tends to favour the comparable uncontrolled price method (if reasonably applicable). This can also be deduced by the sequence in which the transfer pricing methods are enumerated in the ATPG. 3.4 Ranges and Statistical Measures Ranges or statistical measures are generally author - ised by the ATPG, so long as these are justifiable and appropriate. In Austria, the determination of transfer pricing ranges for routine business units is primarily guided by the arm’s length principle as set out in the ATPG. In practi - cal application, commercial databases are commonly used to identify profit margins of comparable inde - pendent entities.
Where a sufficiently robust set of comparables exists (as a rule of thumb, at least seven comparable busi - ness units should be included), statistical means may be employed to further strengthen the reliability of the analysis. In particular, the use of quartiles serves to narrow the arm’s length range by excluding the lowest and highest 25% of outcomes within the full dataset. This process results in the interquartile range, which is widely recognised as a reliable indicator for determin - ing arm’s length profitability, especially in cases where the underlying data exhibits variability or includes out - liers. Generally, no permanent loss-makers (ie, com - parable business units with a negative result in two out of three years under review) should be included in the final set of comparables (unless the functional and risk profile would suggest including them in exceptional cases). 3.5 Comparability Adjustments Year-end adjustments (YEAs) are typically regarded as a contentious financial practice and are only permitted under specific conditions. It is generally recommended that taxpayers adhere to the ex ante approach when determining their pricing with associated enterprises. This is due to the fact that third parties are unlikely to concur with subsequent price adjustments aimed at aligning the result of a contractual partner with a desired target value. It is therefore advisable to under - take year-round monitoring and make the necessary price adjustments. However, a YEA might be deemed at arm’s length if, for instance: • the price-determining factors are agreed in advance; • the ex ante pricing is subject to significant uncer - tainties; or • reasonable efforts have been made by the taxpayer during the year to achieve an arm’s length transfer price (monitoring during the year). If the arm’s length values applied in the context of the implementation of a transfer pricing method constitute a range, it can be deduced that the adjustment will invariably result in a value that falls within the arm’s length range, as determined on the basis of ex ante knowledge.
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