Transfer Pricing Germany
Transfer Pricing Germany

Quick Start - Overview over German TP Environment

The following section gives a high level overview over German transfer pricing basics.

 

Is Germany OECD compliant?

Basically yes. German tax administration has a preference for standard methods and price setting approach. High emphasis is given towards comparability. Rules on business restructuring are overly aggressive.

 

Does documentation have to be compiled and maintained on a contemporaneous basis?

Only in the event of extraordinary transactions (e.g. restructurings, new important contracts, significant change of business strategy).

 

Is there an annual filing requirement?

No.

 

Who has the burden of proof?

If suitable documentation is (finally) presented, the burden of proof resides with the tax administration. Failure to present suitable documentation (or to present timely prepared documentation in the case of extraordinary transactions) gives the tax administration the right to estimate to the burden of the taxpayer under national law.

 

Suitability of documentation is commonly attacked by tax audits. However, no case has been taken to court so far.

 

Is there a threshold?

For small and medium enterprises (SMEs) the documentation requirement is waived. This is the case, if the sum of all good deliveries inbound and outbound for all group companies in Germany does not exceed EUR 5 million and the total of all other charges does not exceed EUR 0.5 million.

 

In what time does documentation have to be presented?

From the first request within 30 calendar days in the event of extraordinary transactions and within 60 calendar days in all other cases. Note: Sometimes the request is hidden in the announcement of a tax audit!

 

What is the expected content of a documentation?

This is basically in line with OECD regulations. Details are outlined in a specific regulation.

 

Is there a specific form for presenting documentation?

The presentation of documentation is form-free but requires an orderly manner. Documentation can be filed in writing or electronically and is not bound to a certain format. German tax administration expects presentation in German language by default. This requirement can in principle be waived. Success of such request depends on the decision makers in the tax administration.

 

Is an advisor or certification required?

No.

 

What penalties can be applied?

In practice only penalties for late filing play a role. The penalty can amount to EUR 1 million per case with at least EUR 100 per day. As tax administration is inclined to apply late filing penalties by financial year and transaction, the amounts can be significant anyway.

 

Is mutual arbitration (MAP) possible?

Yes. There is a wide stretched net of double tax treaties and German administration is in principle supportive towards MAPs. Within the EU and OECD context MAPs tend to be easy. However, MAPs with BRIC countries are not possible or effective. In many cases MAPs are concluded in reasonable time (1-2 years).

 

Is an advance pricing agreement (APA) possible?

Yes. There is a wide stretched net of double tax treaties and German administration is in principle supportive towards APAs (filing fee EUR 20,000). However, APAs with BRIC countries are not possible or effective. Practically, APAs tend to require a lot of time and effort. For this reason, an application should be considered thoroughly.

 

Where can I get more detailed information?

Check out the noumerous guides provided in the internet.

 

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