Transfer Pricing
Country Summary

German transfer pricing regulations are spread across various legislative acts and documents. They include references to OECD guidelines, and Germany has implemented BEPS Action Plan standards. The definition of related parties is established, and transfer pricing documentation requirements are comprehensive. Germany’s transfer pricing methods align with OECD recommendations, and an economic analysis involving a benchmark study is conducted. Documentation must be in the German language, but English documents are accepted. Record-keeping requirements extend for ten years, and there’s a penalty regime for non-compliance.


German Transfer Pricing: Comprehensive Regulations

Transfer pricing regulations in Germany are not confined to a single section but are dispersed across various legislative acts. These regulations incorporate references to OECD guidelines and have integrated the Base Erosion and Profit Shifting (BEPS) Action Plan standards, enhancing transparency for tax administrations. Germany’s definition of related parties is detailed, with a minimum direct or indirect participation of 25% to establish an affiliate.

Extensive Documentation Requirements

Germany’s transfer pricing documentation is comprehensive, requiring contemporaneous documentation for transactions. It follows a three-tier approach, including the Masterfile, Local file, and Country-by-Country-Reporting (CbCR). The local file provides information on ownership structure, business relations, functional and risk analysis, and transfer pricing analysis. A Masterfile contains details on the organization structure, supply chains, service agreements, and transfer pricing policies.

Industry and Company Analysis

Value drivers for relevant industries are identified to gauge profitability. A detailed company analysis includes information on the local entity’s management structure, business strategy, and involvement in restructurings or intangible transfers.

Transfer Pricing Methods and Economic Analysis

Germany, an OECD member, follows OECD transfer pricing methods. The German transfer pricing regulations align with the OECD Guidelines, including the Comparable Uncontrolled Price (CUP), resale minus method, cost plus method, TNMM, and profit split methods. An economic analysis involves a benchmark study, with comparables ideally from the German market.

Language and Record Keeping

Documentation must be in the German language, although English documents are accepted. Records must be maintained for ten years, following Germany’s General Tax Code.

Penalties for Non-Compliance

Germany has established a penalty regime, with penalties ranging from 5% to 10% of a profit adjustment, and minimum penalties apply for delayed document submission.

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