Transfer pricing documentation

The amendments to transfer pricing documentation introduced by the Fourth Bureaucracy Relief Act already apply as from 2025; however, they will become fully relevant in practice particularly for ongoing documentation processes and tax audits from 2026 onwards. Companies should therefore adapt their processes at an early stage.

Expanded documentation requirements

As before, the obligation to prepare transfer pricing documentation applies to business relationships with related parties. This documentation continues to include:

• a description of the transactions and relevant facts (factual documentation)
• as well as the substantiation of arm’s length transfer prices (adequacy documentation)

A new requirement is the mandatory transaction matrix, in which all transactions must be presented in a structured manner – regardless of whether they are ordinary or extraordinary transactions.

Shortened deadlines and increased time pressure

The deadline for submitting the documentation has been uniformly reduced to 30 days. This applies both:

• upon an explicit request by the tax authorities
• and in the context of a tax audit

An extension of the deadline is only possible on a case-by-case basis and upon a reasoned request. In practice, this means that the documentation must in future be available much more promptly and in complete form.

New cooperation obligations during tax audits

In the event of a tax audit, certain documents must be submitted proactively, without any separate request being required:

• transaction matrix
• documentation of extraordinary transactions
• where applicable, the master file (for larger corporate groups)

In addition, the complete transfer pricing documentation may be requested separately at any time.

Expanded powers of the tax authorities

The tax authorities may now request the documentation at any stage of the procedure. In addition, they may require revisions or supplements if, in the authorities’ view, the documents are incomplete. This increases the pressure on companies to keep their documentation audit-ready at all times.

Consequences of non-compliance

In the event of missing or insufficient documentation, the following may apply:

• estimation of transfer prices
• penalties pursuant to Section 162 of the German Fiscal Code (AO)

The requirements regarding the quality and completeness of the documentation are therefore increasing noticeably. A further step in this development concerns the planned introduction of uniform digital interfaces for tax-relevant data.

The objective is to simplify the analysis of corporate data by the tax authorities and to make audits more efficient. The relevant regulation has not yet been issued; entry into force is not expected before the end of 2028 at the earliest.