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January 27, 2025
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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.
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.
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.
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.
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.
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.
For more updates on transfer pricing and international tax, get in touch.
Anna Kupprion is a Tax Consultant at Kreston Bansbach (Germany). She starts her career at a Big Four accounting firm and joined Kreston Bansbach in 2017. She provides expert advice on international tax issues (particularly transfer pricing) and also works on international tax questions such as double taxation agreements and withholding tax and can assist you in the best possible way.”
Andreas studied economics at the university of Hohenheim (Stuttgart) and graduated as Diplom-Ökonom (Master in economics). He joined Kreston Bansbach in 2010 starting in audit. After passing the examinations as tax advisor and certified public accountant he moved to the tax department of Kreston Bansbach in 2015 and since then focuses on international taxation, in particular transfer pricing, for a wide variety of clients from different industries. His main areas of work include transfer pricing planning, transfer pricing documentations, supporting clients in tax audits and overseeing mutual agreement procedures. Besides transfer pricing he also works on other international tax questions, for example relating to double taxation agreements and withholding taxes, issues of national taxation in Germany as well as due diligence and mergers & acquisitions.
August 22, 2024
Recent amendments to transfer pricing in Germany have brought significant changes to the country’s procedural law, particularly affecting transfer pricing documentation requirements.
These new regulations will take effect:
Given that prior tax periods, including those as far back as 2018, may still be subject to tax audits in 2025, these new regulations have a broad scope, making it imperative for taxpayers to be fully informed and prepared.
Previously, transfer pricing documentation was generally requested only during tax audits, with a 60-day deadline (or 30 days for extraordinary transactions) following a tax auditor’s request. The new regulations empower tax authorities to request transfer pricing documentation at any time, even outside of a formal audit and without specific cause. German companies with cross-border transactions must now be prepared to provide transfer pricing documentation at any time.
The current 60-day deadline (30 days for extraordinary transactions) to submit requested transfer pricing documentation will be reduced to 30 days under the new rules.
During a tax audit, taxpayers will no longer receive a separate request for transfer pricing documentation. Instead, they must submit the documentation within 30 days of the tax audit announcement, which could be well before the auditor actually begins their review. This change necessitates that taxpayers prepare their documentation in advance, as the 30-day window is unlikely to allow sufficient time for adequate preparation. Extensions will only be granted in exceptional cases.
The new regulations impose stricter penalties for delays or failures in submitting transfer pricing documentation. Previously, surcharges were rarely enforced due to auditor discretion. However, under the new rules, discretion is significantly reduced. If documentation is not submitted or is deemed unusable, surcharges of 5%-10% of the additional income (with a minimum of EUR 5,000) may apply. Late submissions may incur surcharges of up to EUR 1 million, with a minimum of EUR 100 for each day the deadline is exceeded. Furthermore, failure to provide documentation and unusable documentation could result in the tax authorities estimating the tax base, potentially leading to substantial additional tax liabilities.
We strongly advise reviewing the applicable thresholds in Germany for the preparation of transfer pricing documentation (including master and local files) if your German entities engage in cross-border transactions with related companies, especially for years not yet audited.
If these thresholds are exceeded, it is prudent to prepare the necessary documentation in advance to ensure compliance with the 30-day submission deadline once an audit order is issued after December 31, 2024.
| Master-file | Local-file | |
| German thresholds | Individual turnover of the German company > EUR 100 million | Total consideration for deliveries > EUR 6 million and/or total remuneration for other services (e.g. services, loan relationships, licenses, interests, etc.) > EUR 0.6 million Please note, the deliveries/services received and those provided must be added together. Only cross-border transactions with related parties are to be included in the thresholds. Transactions between domestic members of a group are not relevant. |
If you are interested in doing business in Germany, please contact us here.
April 11, 2024
January 10, 2024
Andreas Katz, Senior Associate Partner at Kreston Bansbach shares his view of the market and key insights on investing in Germany in 2024.
Germany is regarded as the European powerhouse of innovation and industrial strength. The first half of the decade has challenged that long-held accolade, with sluggish growth over the last 3 years caused by a struggling manufacturing industry. However, as we step into 2024, the dynamics of doing business in Germany are shifting, marked by new challenges and opportunities.
One of the key questions facing businesses today is whether to pivot away from China towards European suppliers to protect their value chain. Katz notes, “Our clients at Bansbach, mostly medium-sized groups…often contract with third-party suppliers within Europe to save on logistics costs. Subsidiaries of these medium-sized groups in Asian countries like China are often focused on sales activities and limited assembly work and not on production. While certain clients have pivoted away from certain countries like China within their supplier base now that political risks are more heavily weighted, this is not a major trend within our client base at Bansbach.”
This trend underscores a strategic shift towards localisation, leveraging the proximity and cost advantages within the European Union. However, Katz also clarifies, “While certain clients have pivoted away from countries like China…this is not a major trend within our client base at Bansbach.” This suggests that while some businesses are diversifying their supplier base, the shift isn’t widespread, emphasising a more nuanced approach to supply chain management.
A significant aspect of doing business across borders, Katz points out an increase in transfer pricing-related tax audit issues, stating, “We expect this trend to continue and that transfer pricing issues will often be the main focus in tax audits.” He warns of the financial risks associated with non-compliance, “In case the transfer pricing set-up of a group is not compliant with the applicable international and national standards and a group does not actively monitor its transfer pricing, findings in these tax audits can quickly amount to very significant amounts.”
Katz underscores the need for businesses to “actively monitor its transfer pricing.” His advice is clear – ensure compliance with international and national standards to mitigate the risk of significant financial repercussions.
The energy landscape has always been a cornerstone of industrial activity, and recent geopolitical events have brought this into sharp focus. Katz highlights the impact of the Russia-Ukraine war on energy prices, a challenge particularly for energy-intensive industries. He notes, “The loss of [cheap energy from Russian gas] is a major challenge that may very well be one of the defining issues for German industrial development for years to come.” This situation demands strategic foresight from businesses, particularly in planning for energy cost fluctuations and exploring sustainable alternatives.
For businesses looking to expand into Germany, Katz offers a word of caution and guidance. “Ensure that they are compliant with transfer pricing regulations and actively manage their transfer prices,” he advises, “Given that it is not always possible to resolve resulting double taxation with all countries this may lead to final double taxation and therefore is a significant financial risk.”
If you would like more information about doing business in Germany, please get in touch.
February 8, 2023
BANSBACH has acquired strong partners in the growth region of Lake Constance, with Dr. Altmann in Überlingen, the tax consultancy firm Böttinger in Frickingen-Altheim and Bodensee Treuhand GmbH Wirtschaftsprüfungsgesellschaft, effective 1 January 2023.
With a total of 35 colleagues, WP/StB Dr. Michael Altmann and WP/StB Wendelin J. Böttinger will manage their respective locations and, together with StB Olaf Gläser, will be responsible for the development of the Lake Constance region. Bodensee Treuhand will provide auditing services alongside BANSBACH GmbH. This merger enables BANSBACH to offer its comprehensive advisory services in the Lake Constance area, with continuity through regular contacts and personnel. Services include bookkeeping, preparation, and auditing of annual financial statements, accounting and audit-related consulting services, national and international tax and legal consulting, transaction services, and business consulting services for CFOs.
For more information on the ongoing BANSBACH growth and doing business in Germany, click here.
December 23, 2022
Congratulations to Kreston firm BANSBACH who round off a successful 2022 by significantly improving their ranking in JUVE‘s Top Tax Employers 2023, moving up eight places to 14th in the country.
This is largely a result of employee workplace innovations such as part-time partnerships and the option to work from home, but also a significant strategic expansion plan. This has seen BANSBACH adding a number of acquisitions and strategic partnerships with firms like O&R Oppenhoff & Rädler in Munich as well as adding an entire team from BDO in Freiburg.
Find the article here: BANSBACH | juve-steuermarkt.de
October 31, 2022
August 11, 2022
Congratulations to our German member firm, Kreston Bansbach, whose consulting arm Bansbach Econum, has been ranked among the top consulting firms in Germany in the Handelsblatt 2022 Best Consultants list.
They have been ranked for excellence in the Pharma and Healthcare industries, as well as for their expertise in the Family Business and Mid Market sectors, and for their work in Restructuring and Turnaround.
The peer group survey is run by Handelsblatt Research Institute and asks around 16,000 participants to rate their top consulting peers companies in 22 categories”.
Ranking 2022: These are the best management consultants (handelsblatt.com).
July 8, 2022
After a decline in 2020 due to the Covid-19 pandemic, the consulting market shows signs of recovery. The 20 largest management consultancies headquartered in Germany reported average revenue growth of 16.6 per cent in fiscal 2021. In 2020, total revenues declined on average by 6.8 per cent – after more than 10 consecutive years of growth. The leading international consulting groups grew on average by 13.1 per cent in fiscal 2021 (2020: 1.6%). Current challenges such as the Ukraine war, rising energy and manufacturing costs, and related inflation have had little impact on the revenue guidance of the leading business consultancies: the German top 20 plan to grow by 15.4 per cent in fiscal 2022, and the international consultants by 11.5 per cent.
International firms dominate the German consulting market. The 17 leading international providers on the Lünendonk List generated an estimated global revenue of 136.4 billion euros in 2021, of which Germany accounts for 10.5 billion euros (2020: €8.2 billion; +28%).
The list of Lünendonk® 2022 “Leading business consulting companies in Germany” is attached in German. Consulting companies are presented with their respective total turnover and number of employees.
Find out more here.
March 23, 2022
March 3, 2022
BANSBACH adds BDO firm to Freiburg team, GERMANY –
Kreston Global member firm, BANSBACH, has added another location in Freiburg, growing the audit offering. BANSBACH currently has over 400 employees across 9 offices across Germany.
The newest acquisition, which brings 11 audit and tax consultant professionals, including Alexander Friedemann is a certified public accountant and tax advisor with almost 30 years of
experience and Steffen Walter, who has over 20 years of experience at a “Big 4” company and BDO in auditing individual and consolidated financial statements.
This announcement comes on the heels of the merger with O&R Oppenhoff & Rädler AG in Munich. This was completed in the summer of 2021 and saw 45 employees added to the company as part of an ongoing growth strategy.
The new Freiburg office will support a growing need for tax declaration and structuring, consulting, auditing and corporate finance in the area.
Hanns-Georg Schell, Managing Partner of BANSBACH and head of the Freiburg office comments,
“We are pleased about the reinforcement in Freiburg and are convinced that the colleagues will be an excellent reinforcement for our entire company.”
