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This series of articles on E&Y's survey of practices, perceptions, and trends in 22 countries, plus tax authority approaches in 44 countries, concludes with the 22 non-surveyed countries where transfer pricing rules and regulations are becoming increasingly important.
In 2003, E&Y commissioned independent interviews with 641 parent companies and 200 subsidiary corporations in 22 countries, interviewed tax authorities and transfer pricing experts in the 22 survey countries, and incorporated summaries of revenue authority approaches in an additional 22 countries where transfer pricing rules and regulations are becoming an increasingly important issue (see Exhibit 1).
Part 1 of this article covered the country-specific results for Argentina through Italy, including for each country a brief summary of the comments provided during interviews with fiscal authorities and international tax specialists in each country.1 Part 2 followed the same approach for Japan through U.S.2 Part 3 below concludes the series with 22 non-surveyed countries where transfer pricing rules and regulations are becoming increasingly important. Unless otherwise specified, the respondents in all of the country surveys discussed below were parent companies.
Austria
The Austrian Ministry of Finance has issued the OECD Transfer Pricing Guidelines in a decree that is binding for all financial authorities. Thus, financial authorities are bound to apply the OECD Guidelines in international transfer pricing cases, even though the Guidelines have not been implemented as a legal rule. The risk of transfer pricing scrutiny during a tax audit is high.
Austria generally adheres to the OECD Guidelines and the arm's-length principle. For example, a hidden distribution or a hidden contribution may be assumed if the transfer pricing method does not meet the arms-length principle, which may result in a tax adjustment during audit.
While categories of documents are not formally specified, contemporaneous documentation is highly recommended. Documents proving that intercompany dealings occurred at arm's length are required and these documents must be submitted on request. APAs are allowed in Austria under special decree.
China
China follows the arms-length principle in Article 13 of the Foreign Investment Enterprises and Foreign Enterprises Income Tax Law, enacted in july 1991. The PRC Income Tax Law, Article 13, empowers the tax authority to make reasonable adjustments if payments or receipts between related companies are not made in the same...