Germany: local rules

The arm's length principle is in §1 Außensteuergesetz (AStG), with hidden profit distribution and hidden capital contribution rules also applying. Documentation duties are in §90(3)-(4) Abgabenordnung (AO) and the Gewinnabgrenzungsaufzeichnungsverordnung (GAufzV). Germany follows the OECD Guidelines through the BMF administrative principles (Verwaltungsgrundsätze Verrechnungspreise 2024, 12 Dec 2024).

Every taxpayer with cross-border related-party dealings must keep TP records: a transaction matrix (Transaktionsmatrix), a factual description (local file) and an arm's length analysis. A master file (Stammdokumentation) is also needed if the German company's own revenue was at least EUR 100m in the prior fiscal year. Records are normally only handed over on request, within 30 days. In a tax audit the transaction matrix, master file and records on extraordinary transactions must be handed over within 30 days of the audit order, without a separate request. Records on extraordinary transactions (restructurings, major long-term contracts, function transfers, cost sharing) must be prepared contemporaneously, which counts as met if done within 6 months after the end of the fiscal year. Small companies (related-party goods transactions up to EUR 6m and other remuneration up to EUR 600k) get simplified rules. Records should be in German unless the tax office allows another language.

OECD methods are accepted (CUP, resale price, cost plus, TNMM, profit split). §1(3) AStG sets an interquartile range approach: if the price is outside the range, the adjustment goes to the median. Hypothetical arm's length test applies when no comparables exist, and special rules cover function transfers and financing (§1(3d)-(3e) AStG).

If records are missing or unusable, the tax office may presume higher German income and use the edge of the range against the taxpayer (§162(3) AO). Surcharge of 5% to 10% of the income adjustment, minimum EUR 5,000 (§162(4) AO). Late submission: up to EUR 1m, at least EUR 100 per full day late. In audits, a delay penalty under §200a AO of EUR 75 per day (max 150 days) can apply, plus a surcharge for large taxpayers. Failing to file the CbC report on time can be fined up to EUR 10,000 (§379(2) no. 1c and (5) AO).

Germany's Mindeststeuergesetz applies the IIR and a QDMTT to fiscal years starting after 30 December 2023 and the UTPR after 30 December 2024. Group entities file the Mindeststeuer-Bericht (GIR) with the BZSt unless it is filed centrally abroad, and the group parent files a minimum tax return. Both are due 15 months after year end, 18 months for the first year, never before 30 June 2026; payment follows one month after filing.

Unilateral and bilateral APAs are available (§89a AO), with fees under §178a AO. Interest deduction is limited by the interest barrier (§4h EStG, 30% of tax EBITDA, EUR 3m exemption). Adjustments generally take the form of hidden profit distributions (which can trigger dividend withholding tax) or hidden capital contributions, so secondary effects can arise. Mutual agreement procedures follow tax treaties and the EU Arbitration Convention/Directive.