03/12/25
- The German Federal Central Tax Office oversees transfer pricing compliance.
- A local file has to be prepared if annual transaction amounts relating to the supply of tangible goods with foreign related parties exceed EUR 6 million or if annual transaction amounts in connection with other intercompany transactions exceed EUR 600,000.
- A master file is required if the revenue of one German company exceeds EUR 100 million in the preceding fiscal year.
- Germany’s new transfer pricing regulations took effect on January 1, 2025.
- Now, there’s a shortened submission deadline: You have 30 days to submit transfer pricing documentation upon receiving a tax audit notification. Before the change in regulations, taxpayers had 60 days to submit documentation.
The documentation required:- Local file
- Transactions Matrix
- Master file (if applicable)
- Extraordinary transfer pricing documentation (if applicable)
- German tax authorities can request transfer pricing documentation anytime—including outside of standard audits.
- There is a mandatory submission requirement if you’re going through a tax audit.
- A new automatic submission obligation is now in effect, which means that transfer pricing documentation must be submitted automatically at the start of a tax audit without requiring a special request.
- The documentation requirement has been amended to include a new transaction matrix, which aims to increase transparency and provide a risk overview.
- Germany’s new transaction matrix includes the following:
- Subject and nature of transactions
- Parties involved, identifying the recipient and provider
- Volume and remuneration
- Contractual basis
- Transfer pricing method applied
- Tax jurisdictions concerned
- Indication whether transactions are not subject to standard taxation in the relevant tax jurisdiction
- The German tax authority will reserve audit resources for high-volume and complex transactions.
- Expect stricter penalties for non-compliance or insufficient documentation. For missing or inadequate documentation, penalties range from 5% to 10% of estimated taxable income. If you submit documentation late, you’ll face daily fines.
- If you fail to submit documentation, or it’s missing information, the German tax authorities can raise your taxable income and you’ll be required to disprove it.
