Action 13

Changes to transfer pricing documentation

In Germany, the first regulations based on the BEPS actions were transposed into national law with the “Act on the implementation of the amendments to the EU Mutual Assistance Directive and other measures against base erosion and profit shifting” of 20 December 2016.
With the first “BEPS Implementation Act”, the following changes were made regarding transfer pricing documentation (BEPS action 13):

• A central component is the introduction of a master file and local file approach in Germany. In future, companies with revenue of EUR 100 million or more must create a master file. This aims to gain “an overview of the type of global business activities of corporate groups and the system they use to determine transfer pricing”.
• Furthermore, multinational companies that report consolidated revenue of at least EUR 750 million in their consolidated financial statements must create a “Country-by-Country Report” (“CbCR”). The CbCR obliges companies to send specific key figures (e.g. internal group revenue, income taxes paid, number of employees, main activities of the individual subsidiaries) per country or per subsidiary to the German Federal Central Tax Office (“BZSt”). The BZSt (automatically) forwards all CbCRs received to the relevant (foreign) tax authorities. In addition, the law introduces the automatic exchange of information on advanced cross-border rulings and advance cross-border arrangements on transfer pricing structures.

Although the provision of aggregated information in the CbCR entails the risk of misinterpretations, it also gives rise to new opportunities. The recording and analysis of the additionally required data enables companies to better assess their own activities and value chains in terms of compliance with the existing transfer pricing system.