New German Administrative TP Guidelines
On 14 July 2021, the German Federal Ministry of Finance published the new ‘Verwaltungsgrundsätze Verrechnungspreise’ (the “Administrative Guidelines”) on transfer pricing (“TP”), reflecting the recent legislative developments in Germany and are binding for German tax administrations. The first two chapters of the Administrative Guidelines provide context by commenting on the relations to relevant domestic legislation – such as hidden contributions and distributions – as well as on international guidance provided by the OECD, the EU Joint Transfer Pricing Forum, and the UN.
The core of the document deals with the material aspects of TP. It covers comparability analyses, intangibles, goods and services transactions, as well as financial transactions. The guideline provided here is in line with the OECD TP Guidelines. This reflects the principle from the beginning, that tax examiners should follow international guidance, even in cases where no tax convention exists. The only limit is provided by domestic law, which takes precedence.
Important aspects not covered by the Administrative Guidelines are TP documentation and business restructurings. These are the topics of other internal documents of the ministry. Specifically there are the ‘Verwaltungsgrundsätze Verfahren’ and the ‘Verwaltungsgrundsätze Funktionsverlagerung’.
The Administrative Guidelines are complemented by a short glossary that builds on the glossary of the OECD guidelines. The OECD TP Guidelines themselves are attached to the versions sent to Federal Central Tax Office, the Federal Tax Academy, and the supreme tax authorities of the federal states. They are considered part of the German guidelines.
The new German Administrative Guidelines can be found on the website of the Federal Ministry of Finance here: https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Internationales_Steuerrecht/Allgemeine_Informationen/2021-07-14-verwaltungsgrundsaetze-verrechnungspreise.pdf?__blob=publicationFile&v=4