AUSTRIA Law and Practice Contributed by: Raphael Holzinger, Matthias Jancura and Claudia Synek, Grant Thornton Austria
4. Intangibles 4.1 Notable Rules
tive, the execution of the adjustments must follow the rules of the FFC. If the profits of a domestic group company belong - ing to a multinational group are found to have been increased as a result of a violation of the arm’s length principle, as outlined in Section 6 paragraph 6 of the ITA (in conjunction with Article 9 of the OECD Model Tax Convention on Income and Capital), this consti - tutes the primary adjustment. Typically, a “primary adjustment” – whether occurring within Austria or internationally – should result in a “corresponding adjustment” in instances where Austria is involved, with the objective being to prevent the occurrence of double (non-)taxation. 5.2 Secondary Transfer Pricing Adjustments There are rules on secondary transfer pricing adjust - ments in the ATPG. Indeed, in the event of a breach of the arm’s length principle in cross-border transactions between associated enterprises, this must be given full consideration as previously unrecognised operat - ing income or an overstated operating expense. This will inevitably have repercussions on the taxable busi - ness assets and thus lead to secondary adjustments. The regulations pertaining to secondary adjustments within the ATPG are largely consistent with the OECD Guidelines. 6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information Austria has a plethora of treaties in place – the list of which is regularly updated by the Austrian Ministry of Finance. The aforementioned list includes links to the treaty texts. The following agreements have been entered into by Austria with other jurisdictions: • double taxation conventions regarding income and capital with approximately 90 jurisdictions; • tax information exchange agreements with approx - imately seven jurisdictions (as there is no double taxation convention in place with those jurisdic - tions); and • double taxation conventions regarding inheritance and gift tax with approximately ten jurisdictions.
The ATPG generally adhere to the OECD Guidelines with regard to intangibles. Hence, there are no special rules in place. It is important to note that the term “intangible” as used in transfer pricing regulations should not be understood in the traditional legal, tax or accounting sense. Rather, it should be interpreted independently for the purposes of the ATPG and the OECD Guide - lines. Furthermore, it is crucial to consider the legal and economic owner of an intangible separately; that is to say, the DEMPE (development, enhancement, maintenance, protection and exploitation) functions The ATPG generally adhere to the OECD Guidelines concerning hard-to-value intangibles; consequently, there are no specific regulations in place. On this basis, if the tax authorities can confirm the reliability of the information on which the ex ante price agree - ment is based, no corrections should be made on the basis of ex post results. Furthermore, it is only possible to make a transfer pricing adjustment (primary adjustment) for a hard-to- value intangible transaction in Austria in accordance with national procedural regulations. 4.3 Cost Sharing/Cost Contribution Arrangements In Austria, cost sharing/cost contribution arrange - ments are a generally recognised concept. The ATPG typically adhere to the OECD Guidelines with regard to such arrangements and, consequently, there are no specific regulations in place. must always be taken into account. 4.2 Hard-to-Value Intangibles 5. Adjustments 5.1 Upward Transfer Pricing Adjustments The ATPG permit both “primary adjustments” and “secondary adjustments”, which are possible after the filing of the tax return. However, from a tax perspec -
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