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Article:

Corona Fund and Transfer Pricing

23 April 2020

Ensure a timely documentation of an appropriate transfer pricing setup in order to prove that funds are solely used to preserve business activities in Austria!

In order to ease liquidity shortages of Austrian companies, the Federal Government established the Corona Assistance Fund on April 3, 2020 under the 3. Covid-19 Act as a support measure. The current related directive comprises guarantees and direct loans; a directive for non-repayable direct grants is still pending.

Applications shall be submitted to the competent credit institution and have to plausibly prove that the liquidity needs are due to economic effects caused by the spread of Covid-19. In addition, it must be stated which payment obligations are to be covered by the financial measure and for which period under consideration. The applicant commits to use the received liquidity exclusively for the coverage of this liquidity requirement, in order to preserve the business activity in Austria existing at the time of application and to take care of the preservation of jobs in Austria (see guidelines to the Covid-VO, para. 12.1 ff).

In this context, Austrian companies that take advantage of the support measures should, as a preventive measure, provide specific documentation to prove that the liquidity received does not benefit affiliated companies abroad through improper transfer prices. It will also be necessary to prove that the Austrian company could not have avoided its liquidity shortage in advance through an appropriate cross-border transfer pricing setup. In accordance with the arm's length principle, it should be documented in detail that business relations with affiliated companies abroad are conducted under the same conditions as would have done with third parties. Depending on the object of the company, this may involve a wide variety of transactions, ranging from intra-group transfer of goods, services and licensing relationships to the provision of funds. For this reason, a comprehensive analysis of transactions with affiliated companies is essential in case support measures from the assistance fund have been granted.

We would be pleased to support you in the timely preparation of an appropriate documentation.