Germany’s New Transfer Pricing Laws
The German transfer pricing landscape has been reshaped recently due to changes in procedural law. It’s important to analyze the changes carefully and incorporate them into your transfer pricing risk management agenda. Some of the changes refer to procedural transfer pricing and have significant impact on time management.
Deadlines for submission of transfer pricing documentation have been shortened to 30 days instead of 60 days, but in practice it is even more strict. The 30-day count is from the start of the tax audit, while the 60-day count started from the request made by the tax authorities during tax audit. This new deadline will be applied for the first time for taxes arising after December 31, 2024 (with some adjustments based on the date of announcement of a tax audit).
The path that German tax law will follow is getting closer to the more and more common global approach—a 30-day timeline from the day of request and not tax audit start date. therein some countries, there are even more restrictive deadlines, which allow taxpayers only few days for submission of transfer pricing documentation. As a result, there is no excuse for postponing the preparation of documentation—30 days may not be sufficient to get the files done with due diligence on time. And a tax audit covers not only transfer pricing so other tax data may be also requested.
The other change in Germany’s procedural transfer pricing law introduces the concept of the qualified cooperation request, an instrument that enforces the sharing of information with tax authorities before the tax audit. Within six months of the commencement of an audit, a taxpayer may be asked to cooperate with the tax authorities. In such a case, the taxpayer must respond to the qualified request within one month and financial penalties may be imposed if no response is provided.
The 30-day deadline for submission of transfer pricing documentation and one month for providing the tax information are the indicators of a new level of efficiency assumed by the tax authorities. It is expected that tax compliance is made with due diligence within statutory deadlines and German tax authorities introduced instruments to ensure that taxpayers oblige.