Andreas Katz
Tax advisor and certified public accountant, Kreston Bansbach
Anna Kupprion
Tax advisor
Germany’s new transfer pricing rules
November 8, 2024
In January 2025, Germany’s transfer pricing (TP) rules will impose stricter documentation requirements, with shorter deadlines and enhanced penalties for non-compliance. These changes mean that companies with cross-border transactions must rigorously prepare to meet the new standards. Andreas Katz and Anna Kupprion of Kreston Bansbach outline the specifics of these changes in their recent article on International Tax Review, which we summarise here to help tax teams and cross-border businesses stay ahead.
Key changes to Germany’s new transfer pricing documentation rules
Germany’s TP documentation framework follows the OECD’s three-tiered model, involving a local file, master file, and country-by-country report (CbCr). While many businesses may already be familiar with this structure, the new rules are tightening submission deadlines and documentation readiness requirements. Here’s a closer look at what’s changing.
1. Shortened submission deadlines
The new rules empower German tax authorities to request TP documentation at any time, with a reduced submission deadline of 30 days. This includes providing a detailed transaction matrix, master file, and any documentation for extraordinary business transactions within 30 days of a tax audit order. These reduced timelines mean that businesses must be audit-ready, as requests can now occur outside standard audits.
2. Stricter penalties for non-compliance
Germany’s updated regulations also impose steeper penalties for late or incomplete documentation submissions. Under the new rules, penalties will be applied more uniformly, with surcharges ranging from 5% to 10% of estimated taxable income for missing or unusable documentation, and late submissions facing daily fines. This shift could be costly, especially for businesses that may have previously depended on extended deadlines.
3. Consequences of non-submission
In cases of inadequate or missing TP documentation, German authorities are now authorised to assume a higher taxable income and require the business to disprove it. This presumption poses significant risks for non-compliant taxpayers, highlighting the importance of preparing comprehensive and accurate documentation.
Next steps for compliance
With TP compliance expected to become an even greater focus for German tax authorities, international businesses should prepare their documentation in advance. Andreas Katz and Anna Kupprion recommend proactively recording all extraordinary transactions and carefully preparing documentation to avoid the costly consequences of non-compliance.
As Germany’s TP environment continues to evolve, having thorough and up-to-date documentation will be essential to avoid these increased risks and penalties.
Read the full article by Andreas Katz and Anna Kupprion on International Tax Review here.
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