Anna Kupprion

Tax Consultant at Kreston Bansbach

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 Katz

Tax advisor and certified public accountant, Kreston Bansbach

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.

Transfer pricing in Germany: Prepare for tax audits

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:

• For all tax periods beginning after December 31, 2024 and
• For all tax audits initiated after January 1, 2025

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.

Key changes to transfer pricing in Germany

1. On-demand transfer pricing documentation

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.

2. Reduced submission deadlines

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.

3. Mandatory submission during tax audits

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.

4. Stricter penalties for non-compliance

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.

Recommendation

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.

If you are interested in doing business in Germany, please contact us here.