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Germany: Revised Administrative Guidance on Transfer Pricing and Tax Audits
Transfer pricing and the documentation of arm’s-length transfer prices are closely scrutinized and often disputed in tax audits. Germany has had administrative guidance in place since 2005, specifying German taxpayers’ obligations during a tax audit.
Transfer pricing and the documentation of arm’s-length transfer prices are closely scrutinised and often disputed in tax audits. Germany has had administrative guidance in place since 2005, specifying German taxpayers’ obligations during a tax audit.
On December 3, 2020, the German Ministry of Finance published a revision of this guidance, now known as the ‘Administrative Principles 2020’. The revised guidance focuses on taxpayers’ obligations to cooperate with German tax auditors, the burden of proof of arm’s-length transfer prices and the assessment of apparently more appropriate transfer prices. Although such administrative guidance does not bind either taxpayers or the tax courts, it acts as an interpretation of German tax law, to which German tax auditors are bound.
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