Worldwide transfer pricing reference guide 2014

Germany (continued)
Statute of limitations on transfer pricing assessments (continued)
§175a General Tax Code stipulates that tax assessments can be amended due to the result of a MAP/EU arbitration procedure up to one
year after the effective date of such agreement, irrespective of whether the aforementioned statutes of limitations have expired before.
Return disclosures/related party disclosures
Apart from transfer pricing documentation requirements, there are currently no specific disclosure requirements.
Transfer pricing-specific returns
Apart from transfer pricing documentation requirements, no separate returns for related party transactions are currently required.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
The likelihood of a tax audit in Germany is high for domestic and foreign groups of companies. Usually, a tax audit covers a three to four
year period on a continuous basis. The risk of transfer pricing issues being scrutinized during a tax audit is also high, and continuously
rising. Due to the documentation requirements, and in light of the stricter law effective 1 January 2008, it is expected that transfer
pricing issues will continue to attract significant attention in tax audits. It is expected that transactions qualifying as exceptional business
transactions under the documentation provisions, such as the transfer of functions, will particularly attract the tax auditors’ attention.
Further, many tax audits increasingly focus on (brand) royalty charges and management services cost allocations into Germany.
The likelihood that, if transfer pricing is reviewed as part of the audit, the transfer pricing methodology will be challenged is also high.
APA opportunity
APAs are generally available. The German Ministry of Finance issued an APA circular on 5 October 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.
Expected reaction to OECD Report on BEPS
The OECD Report and discussions on BEPS in general add to the ongoing public debate on fair earnings and taxation of companies and
individuals in Germany. This debate is being taken very seriously and is expected to have an effect on the tax audit climate.
Legal documentation requirements exist and the taxpayers’ compliance with making available relevant information is being enforced.
The same is true for IP structures, which are being increasingly scrutinized in tax audits. Masterfile documentation is maintained by many
German taxpayers based on the concept proposed by the European Joint Transfer Pricing Forum and could be amended for additional
requirements going forward.
Overall, with specific transfer pricing regulations already in place and with tax authorities’ focus on transfer pricing audits already
increasing, the BEPS debate will further intensify these developments.
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