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13.4.2. Specific TP Issues

Intra-Group Services

The following factors may be considered while determining the arm’s length price for intragroup services:

  • Whether any real intra-group services have been provided;
  • Whether the provision of intra-group services has conferred an economic or commercial value to a group member and whether an independent enterprise in comparable circumstances would be willing to pay or perform in-house for its services; and
  • Whether the charge for intra-group services involves duplicative services or services for incidental benefits, in which cases such charge will be disregarded by the tax authorities;

For routine services, the guidelines prescribe a profit mark-up between 3% and 10% (often 5%) based on the report of the EU Joint Transfer Pricing Forum. However, for routine services provided prior to 1 January 2022, the previous gross profit margin of between 5% and 15% can still be applied.

The guidelines also adopt the OECD simplification regarding low value-adding services, which means that the benefits test need not be applied on each individual service but may be applied on service categories. A 5% mark-up is prescribed on direct and indirect costs under this approach.

Intangible Property

The following factors are to be considered while determining the arm’s length price for transactions involving the license or transfer of intangible property:

  • The expected benefits from the intangible property and the commercial alternatives available to the acquirer or licenses derived;
  • Any geographical limitation on the exercise of rights to the intangible property;
  • The exclusive or non-exclusive character of the rights transferred; and
  • Whether the transferee has the right to participate in further developments of the intangible.

The arm’s length price for transfer or licensing of intangible property is determined in relation to the development, enhancement, maintenance, protection, and exploitation of the intangible property.

Cost Contribution Arrangements

Cost Contribution Arrangements (CAAs) are contractual agreements between affiliated companies to share the contributions and risks in connection with the joint development, production, or procurement of intangible assets, tangible assets or services, whereby it is expected that the relevant intangible assets, tangible economic goods or services will result in advantages for all CCA participants. Cost contribution agreements must be concluded in advance in writing and with appropriate documentation. A contribution made on the basis of a cost contribution agreement can only be taxed to the extent that it does not permanently exceed the third-party price for the services obtained from the CCA.

Permanent Establishment (‘AOA Approach’)

Under the Authorized OECD Approach (AOA), the OECD has published guidelines for the allocation of profits to permanent establishments. However, Austria has reserved the right to continue to use the version of Art. 7 OECD-MA as amended before 2010 in its tax treaties. Therefore, in Austria, the AOA is currently only legally relevant to the extent that it does not conflict with the OECD commentary on Article 7 as amended before 2010.