Transfer pricing in Germany

Transfer pricing in Germany at a glance

Regulation Type OECD
Are there specific transfer pricing regulations? Yes
Submission deadline No earlier than 6 months after the end of the financial period
Submission deadline upon request 60 days
Annual update required No
Official language requirements German (English accepted)
Potential impact of penalties 25K


German tax law

Rules for transfer pricing in Germany are based on:

  • Federal Ministry of Finance; Section 8 paragraph 1 and 3
  • Corporate Income Tax Act; Section 4 paragraph. 1
  • Income Tax Act; Section 1
  • Foreign Tax Code; Section 90 paragraph 3 and section 162 paragraph 3 and 4 General Tax Code , and
  • Decree-law on the manner, content, and extent of documentation in the sense of section 90 paragraph 3 of the General Tax Code, decree-law on relocation of business functions.


The German Transfer pricing laws are generally in line with the OECD Transfer Pricing Guidelines. However, the OECD Guidelines provide support for domestic use, but do not constitute binding law in Germany. At some points the German transfer pricing laws are not in line with the OECD, namely matters regarding the application of transactional profit methods, documentation requirements and the treatment of transfers of functions.


Germany has a priority in which the OECD prescribed methods should be used. The preferred methods are the:

  • Comparable Uncontrolled Price method;
  • Resale price method, and the
  • Cost plus method.

If fully comparable arm’s-length prices can’t be found due to the limited availability of comparable data, two additional methods are added to the list, namely the:

  • Profit split method, and the
  • Transaction Net Margin Method.

If none of the methods above can be due to limited availability of comparable data, a hypothetical arm’s-length test is to be performed.

Documentation requirements

Information that should be provided:

  • General information:  shareholder relationships, organizational and operative group structure and operations
  • Description of intercompany transactions: manner and extent of transactions, intercompany contracts and a list of important intangibles
  • Functions and risks analysis: description of functions and risks the taxpayer bears within the intercompany transaction, contractual terms, business strategies and value chain
  • Transfer pricing analysis: selection of the transfer pricing method, appropriateness of the method selected, calculation of the transfer price, list of comparables and documentation of adjustment calculations

Special requirements:

The taxpayer has to document any special circumstances used to substantiate the arm’s length nature of the price determined, including: special business strategies, business restructurings, cost contribution agreements, overview of Advance Pricing Agreements (APA’s) and mutual agreement procedures, information on transfer pricing adjustments, causes for losses from intercompany transactions, as well as countermeasures (if losses occur in more than three consecutive financial years).


Documentation must be prepared in German; however, taxpayers may ask for approval to prepare documentation in English. In practice, taxpayers mostly use English documentation and provide translations upon request from the tax auditors.


Preparation deadline

For regular business transactions there is no deadline to prepare documentation. For extraordinary business transactions, transactions that have a substantial impact on the amount of the taxpayer’s income, documentation must be prepared contemporaneously, meaning within six months after the end of the fiscal year.

Deadline to submit upon request

Within 60 days of auditor’s request for regular business transactions, and within 30 days for extraordinary business transactions.

Advance Pricing Agreements


German transfer pricing legislation provides for the opportunity to obtain an APA. The German Ministry of Finance issued an APA circular on October 5, 2006, which defines the APA procedures and provides guidance with regard to the negotiation of APAs. Additionally, the Annual Tax Act 2007 introduced fees for APAs. The administrative competence for APAs is centralized in the Federal Central Tax Office. The APA process can take anywhere from eighteen months to several years from application to conclusion. An agreement reached between two competent authorities will be made conditional in two regards: the taxpayer must consent to the intergovernmental agreement, and must waive its right to appeal against tax assessments, to the extent that they are in line with the content of the APA.


APA’s in Germany can be agreed upon for a period between three and five years.


If documentation is not submitted, or if the documentation is essentially unusable, or if, in case of doubts regarding the appropriateness of the transfer prices, the foreign transaction partner does not cooperate in clarifying the doubts, the tax authorities can make an estimate. In that case, the German tax authorities are entitled to adjust to the most unfavorable point of the arm’s-length range. A penalty of 5 percent to 10 percent of the income adjustment will be assessed, with a minimum surcharge of € 5,000 if the documentation is not provided or if the documentation is essentially unusable. In case of delayed submission, the surcharge may be up to € 1 million, at least € 100 per day. Penalty payments are not deductible (sec. 162 paragraph. 4 General Tax Code). | the global transfer pricing reference guide