1. Subject 2 – The Future of Transfer Pricing Austrian Branch Report
Dr. Andrea Lahodny
Partner – Transfer Pricing
Raffaele Petruzzi
Dr. Raffaele Petruzzi, LL.M.
Managing Director, WU Transfer Pricing Center
Transfer Pricing Advisor
Vienna, 15 March 2017

2. Agenda
The Transfer Pricing Changes Introduced by the OECD BEPS Project
The Impact of BEPS on Austrian Transfer Pricing Practice
Conclusions
Raffaele Petruzzi

3. The TP Changes Introduced by the OECD BEPS Project BEPS Actions 8-10
Identifying the commercial or financial relations
Recognition of the accurately delineated transaction
Location savings and other local market features
Assembled workforce
MNE group synergies
Commodity transactions
Intangibles
Low value-adding intra-group services
Cost Contribution Arrangements
Raffaele Petruzzi

4. The Impact of BEPS on Austrian TP Practice General
2010 AT TPG by MoF
No official statement by MoF
Relevance of OECD TPG (prevailing, when conflicts with AT TPG)
BEPS Action 13 implemented into legislation
BEPS Actions 8-10 expected to be implemented without legislative/administrative changes
Static vs. dynamic adoption?
Andrea Lahodny

5. The Impact of BEPS on Austrian TP Practice Intangibles
Definition
Transactions involving intangibles and TP methods
Ownership of intangibles
Comparability, group synergies, and location specific advantages
Hard-to-value intangibles
Raffaele Petruzzi
Definition
How the new OECD definition will interplay with AT national law?
Transactions involving intangibles and TP methods
Guidance already partially implemented in AT TPG (e.g. charging royalties to distribution entity, use of financial valuation techniques)
How to deal with AT TPG rejecting determination of royalty fees by reference to licensee’s profits?
Ownership of intangibles
Substance over form approach
Remuneration in line with contribution to value
Relevance of DEMPE (?)
How to perform a DEMPE analysis? RACI Model?
Comparability, group synergies, and location specific advantages
Strict comparability
Guidance on implicit support as relevant for group synergies?
Tax administration’s view on LSA (should be attributed to principal) in line with BEPS and developing countries’ view?
Hard-to-value intangibles
Design of acceptable error range for gap ex-ant vs ex-post approach?

6. The Impact of BEPS on Austrian TP Practice Other Topics
Cost Contribution Arrangements
Risk and capital
CUP and quotes for commodity pricing
Intra-group services
Raffaele Petruzzi
Cost Contribution Arrangements
Generally, AT TPG in line with OECD
No mark-up applied to expenses shared?
No active involvement needed?
Risk and capital
Going forward, issues of thin capitalization PLUS issues of overcapitalization
How to define the risk-free return?
How to address cases of negative interest rates?
Is the risk-free return approach at arm’s length?
CUP and quotes for commodity pricing
Not much guidance available
Guidance on loan pricing (contrasting views) valid for commodities?
Intra-group services
AT definition of shareholder activities seems broader than OECD definition
Mark-up for LVAS: 5-15% (AT TPG) vs 3-10% (EU JTPF) vs 5% (OECD); no safe harbours (?); how to opt-in?

7. The Impact of BEPS on Austrian TP Practice Documentation and CbCR
AT TP Documentation Act (August 2016)
CbCR
Master File and Local File
Andrea Lahodny
CbCR
CbCR for FY starting from 1 Jan 2016 for MNEs with consolidated revenues of EUR 750 mio.
Multilateral Competent Authority Agreement on Exchange of CbCR
Penalties: up to EUR 50,000
Transparency: more cooperative compliance or more disputes?
Compliance burden for taxpayers (est. avg. TEUR per entity) and for tax administration (est. EUR 2 mio.)
Usefulness of data provided?
Confidentiality issues?
Master File and Local File
FY starting from 1 Jan 2016 if revenues above EUR 50 mio. for 2 consecutive years
TP documentation for previous years?
TP documentation for companies below the threshold?
Final decree?

8. The Impact of BEPS on Austrian TP Practice Other BEPS Actions
TP and digital economy?
Interest deductibility?
Automatic exchange of advance rulings and APAs
Commissionaire structures and attribution of profits?
Binding arbitration
Raffaele Petruzzi

9. Conclusions Could BEPS work is favor of MNEs? Needs for the future
New OECD TPG: more certainly vs more flexibility
Documentation and transparency: more cooperative compliance vs more disputes
Binding dispute resolution
Needs for the future
A uniform interpretation of the ALP
Investments on technical resources, as well as capacity and knowledge building
Cooperative compliance tools
Effective dispute resolution mechanisms
Andrea Lahodny

10. Contact Details Deloitte Tax Wirtschaftsprüfungs GmbH
Renngasse 1/Freyung, 1010 Wien, Österreich
MMag. Dr. Andrea Lahodny
Wirtschaftsprüfer und Steuerberater | Partner | Tax Services – Transfer Pricing
T: | M:
Department of Public Law and Tax Law
Institute for Austrian and International Tax Law
Welthandelsplatz 1, Building D3, 1020 Vienna, Austria
Dr. Raffaele Petruzzi, LL.M. T