Germany: New transfer pricing rules for cross-border intra-group financial transactions - Impact of the Growth Opportunities Act

HMRC recently released Transfer Pricing Guidelines for Compliance, a clear framework for compliance to provide tax-payers with more guidance but with increased scrutiny and potential risks for those who fall short.

Discover the new Transfer Pricing framework in Cyprus created by WTS Cyprus, covering TP rules, documentation, filing obligations, and statutory requirements.

We are pleased to introduce the latest WTS Global Transfer Pricing Guide for Asia Pacific countries.

On March 22, 2024, the Federal Council approved the Act to Strengthen Growth Opportunities, Investment and Innovation as well as Tax Simplification and Fairness (Growth Opportunities Act, WtChancenG).
 

Indonesia's new transfer pricing guidelines are enshrined in the Minister of Finance Regulation 172/2023 ("MoFR-172").

In this latest edition of the WTS Transfer Pricing Newsletter, our colleagues from 13 countries provided an update on recently introduced legislations and cases.

How data analytics can add value using the example of a global transfer pricing documentation project

With a view to facilitating transfer pricing reporting properly, the Hungarian Ministry of Finance has published a 25-page document at the end of March.

New year, new legislation – which means that this year, just like at the beginning of every year, the focus is on changes to the tax rules. One of the most important changes affecting most Hungarian taxpayers in 2023 is the amendment of the transfer pricing documentation rules.

The Finance Ministry published an announcement dated 20 Dec 2022 on the base rate and margin notice for transfer pricing purposes in personal income tax (PIT) and corporate income tax (CIT). The announcement came into force on 1 January 2023.

New rulings regarding local research tax credits paving the way for consistently deducing the local research tax credits and/or similar subsidies from any R&D cost-plus services provided by eligible French companies

A summary of the 2022 Tax Reform Act, which contains recommendations for updating the Transfer Pricing rules.

The Superior Court of Justice has decided that, until further legislative measures are taken, the so-called PRL 60 method must be calculated in a specific way. Our article sheds light on the decision and elaborates on the main practical implications.

The Argentine Tax Court has recently ruled on an interesting Transfer Pricing case, concerning the timing of benchmarking a transfer of goods. Further details about this case can be found in the article.

Provisional Measure (MP) 1152, published on December 29, 2022, substantially amended the Brazilian transfer pricing rules currently in force for transactions carried out between related parties, with the purpose of aligning them with the OECD Guidelines.

The new law significantly tightens obligations to cooperate with the revenue authorities in the area of transfer pricing.

The draft legislation provides for regulations to be introduced that would require taxpayers to produce (and provide upon request) TP documentation in a specified format in line with the OECD recommended approach (such as Master file and Local file). In addition, HM Revenue & Customs proposed the introduction of a Summary Audit Trail. The UK had previously implemented the Country-by-Country Reporting requirement.

The Indonesian government introduced an additional three Transfer Pricing methods that provide further guidance on certain related party transactions. Our colleagues summarize the key aspects of this legislative development.

This autumn has seen hard-fought victories of Ukrainian defenders at the frontline, criminal attacks on Ukrainian critical energy infrastructure, resulting in severe power shortages (which I had the dubious pleasure to experience while writing this note), and…Ukrainian taxpayers’ struggling to comply with the Transfer Pricing reporting deadline.

Cash pooling is a form of money management to ensure that all related companies in the supply chain will have enough cashflow to conduct their business. This can either be carried out by the actual transfer of money or by notation between companies. In any case, the OECD rules require that all related companies charge the market interest rate.

Since 2018, the Senegalese government has instituted reporting and documentary obligations in Transfer Pricing in accordance with the OECD BEPS actions 8-10, 12 and 13. However, it must be recognized that Transfer Pricing tax litigation is not yet abundant in Senegal, even though the regulatory framework is constantly being strengthened as a result of the various tax reforms that have already been discussed in previous issues of this newsletter.

July 4, 2022 saw the Saudi Tax Authority, Zakat, Tax & Customs Authority, issue a document for public consultation regarding proposed amendments to the Transfer Price bylaws to be applied to Zakat payers. The document was valid for public consultation until July 30, 2022. Zakat, Tax & Customs Authority has issued results relating to the public comments received on the public consultation platform.

The interest of the Polish Tax Authorities in benchmarking studies increases. Benchmarking studies are being carefully audited and regularly challenged during the tax controls, resulting in tax assessments and further tax proceedings before the administrative courts.

The Italian Tax Agency has issued instructions, through Circular Letter No. 16/E of May 24, 2022, with respect to the correct and practical use of the "arm's length range" for the application of the Italian Transfer Pricing rules.

Based on the recent decision of the Austrian Financial Court, liability commissions must be charged from the start of the loan agreement, reductions in the Transfer Pricing with respect to deliveries of goods must be credibly demonstrated and the arm's length interest must be charged for supplier credits.

Intra-group financing in Austria, alongside the interest rate, a particular strong focus is placed by the tax authorities on whether the debt instrument might be re-qualified into “hidden equity”. Thus, there should be documentation on the capital structure of the borrower, transparency of the loan agreement as well as the arm's length character of the terms and conditions.

In this latest edition of the WTS Transfer Pricing Newsletter, our colleagues from 13 countries provided an update on recently introduced legislations and cases.

In the period 2020-2021, the Chilean Internal Revenue Service launched a new wave of tax audits with a focus on TP compliance and the substance of declared transactions.

Kenya’s 2022 Finance Act amended various provisions of the income tax law.

Continuing on an ambitious internationalization and integration process

April 2022 saw the Brazilian Federal Revenue Service and the OECD present a proposal for the new Brazilian TP system

In its resolve to make the MAP process robust and transparent, the Indian Revenue contin­ues to have the following key resolution parameters in its updated Guidance:

More than 5 years after the signature of the Multilateral Instrument (MLI) on June 7, 2017, Senegal deposited its instrument of ratification of the Multilateral Convention on May 10, 2022.

In practice, there is little room for MNEs to reconcile the sometimes conflicting opinions of the two authorities.

The Argentine Income Tax law includes a large number of “deemed affiliated” companies. All of them must be scrutinized in the annual Transfer Pricing report, which needs to be filed mandatorily with the Argentine Revenue Service.

At the TP Minds Conference which took place in June 2022 in London, senior tax officials and TP practitioners shared their experiences of dispute avoidance and resolution and other TP-related matters.

The Italian Tax Agency recently issued a ruling (No. 78/E dated December 31, 2021) analyz­ing the application of the DAC6 legislation with respect to TP adjustments.

The European Commission is working on a proposed directive (ATAD3) which will bring measures to prevent the misuse of shell entities for tax purposes.

Hungarian TP rules are to change significantly in accordance with the bill submitted to the Hungarian Parliament in the summer of 2022.

Recent case law regarding intercompany cash pool interest rates in a decision involving the SAP Group. 

The TP documentation must be submitted to the DTA no later than 60 days after the deadline for filing of the corporate income tax return.

The new info from May 5, 2022 presents the current legal opinion of the Austrian tax author­ities with regard to bilateral MAP and AP.

In this latest edition of the WTS Transfer Pricing Newsletter, our colleagues from 14 countries have provided an update on recently introduced legislations and cases.

On 14 January 2022, Taiwan’s Executive Yuan announced that controlled foreign company (CFC) rules will come into force in 2023 in response to Pillar Two of the OECD’s Global Anti-Base Erosion (GloBE) Proposal.

The Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 made a series of changes to New Zealand’s international tax rules, as a domestic law response to the OECD/ G20’s BEPS project.

How transfer pricing disputes are handled in the Netherlands and the relationship between transfer pricing and other tax codes.

In the Czech Republic, transactions between related parties are regulated by the requirement to comply with the arm’s length principle.

In 2021, the United Kingdom’s Financial Conduct Authority announced several changes to the benchmark settings currently published by the ICE Benchmark Administration

Intercompany financing is common among the MNEs. For any borrowing from related parties, the Chinese borrowers must pay interest to them.

Law #466 (in force since 23 May 2020, with several further amendments) supplemented TP rules with the new provisions on business purpose.

Following a public consultation on TP documentation, the UK government decided to introduce new legislation and require the largest MNE with presence in the UK to maintain a transfer pricing Master File, Local File and supporting Summary Audit Trail. The new requirements could take effect from April 2023.

Effective 1 January 2022, the Netherlands have implemented a ground-breaking legislation to end its long-standing practice of allowing unilateral downward TP adjustments.

On 26 November 2021, Italian Revenue Agency published Circular Letter no. 15/E (the “Circular”) providing clarifications on the TP documentation rules contained in the Instruction.

Every Irish entity must prepare a Local File. Companies are allowed to prepare a consolidated ‘Country File’ for all Irish entities of an MNE group.

In a series of rulings in 2019 and 2020, the German Federal Fiscal Court has abandoned its decades-long ruling practice on implicit group support and the blocking effect of para. 9 OECD Model Tax Convention.

The notions of “main entrepreneur” and “routine entity” are often used, as it is the routine entity’s margin which will be set, with the entrepreneur receiving the residual profit/loss.

Section 4 of the Austrian TP Documentation Law (VPDG) contains a notification obligation in connection with CbCR.

In this latest edition of the WTS Transfer Pricing Newsletter, our colleagues from 15 countries have provided an update on recently introduced legislations and cases.

There have been several changes to German Transfer Pricing rules in the past months. Read more for additional information.

On 14 July 2021, the “Verwaltungsgrundsätze Verrechnungspreise” (Administrative Principles Transfer Pricing, in the following “administrative principles  2021”) were published.

On 7 October 2021, the Austrian Federal Ministry of Finance published the final version of the Austrian Transfer Pricing Guidelines (Austrian Guidelines 2021). In 2010, the Austrian tax authorities published the transfer pricing guidelines based on the OECD Guidelines from 2010 for the first time.

New conditions for the deductibility of costs subject to the transfer prices (article 21.f amended in 2021) introduced in the fiscal law of Benin in 2021

By joining the Inclusive Framework on Base Erosion and Profit Shifting on 2 June 2017, Thailand committed itself to the implementation of the BEPS minimum standards.

On 8 October 2021, the OECD announced that 136 Inclusive Framework members signed onto its Pillar 1 and Pillar 2 deals.

The Vietnamese tax authorities are paying special attention to TP compliance, especially to identifying deficiencies in ascertaining related party transactions.

On 23 December 2020, the Taiwanese Supreme Administrative Court issued judgement in case (109) Pan Tzu No. 661, concerning one-off adjustments to sales prices.

In Senegal, the Transfer Pricing provisions, largely inspired by the OECD Guidelines 2017, have been incorporated into the Senegalese General Tax Code.

Awareness and compliance with Nigeria’s Income Tax (Transfer Pricing) Regulations 2018 has gained increased momentum and attention among associated taxable persons and tax professionals.

On 30 September 2021, the China State Taxation Administration responded to five hot questions regarding the Transfer Pricing implications of the COVID-19 impacts.

In the last five years, we have witnessed Latin American and Caribbean countries undergoing extensive reforms to their Transfer Pricing regulations to achieve standardization for the internationally proposed BEPS measures. In addition to this scenario, Chile is also one of the 130 countries and jurisdictions that have subscribed to the OECD’s Inclusive Framework.

The Argentine Revenue Service has made available a document with recommendations and suggestions for the Transfer Pricing analysis (the “document”) to be conducted for the fiscal years impacted by the COVID-19 pandemic.

In 2021, the State Tax Service of Ukraine notably intensified control over TP matters. Thus, according to the Tax Code of Ukraine, TP control consists of three stages.

The French Tax Administration has grown bolder and has deployed new, ambitious approaches both proposing a different Transfer Pricing method and providing an economic analysis to support the profit allocation.

In a recently published decision of the Court of Appeal of Ghent relating to TP (no. 2016/ AR/455), the Court decided in favour of the taxpayer. The case originated from an audit initiated by the Special Investigation Squad (BBI/ISI) in 2009. Considering TP cases in Belgium are scarce, it is interesting to see the court’s point of view.

15 countries provided an update on recently introduced Transfer Pricing legislations and cases, in particular the adoption of certain OECD Guidelines. Additionally, global developments like the Pillar 1 and Pillar 2 initiative, global minimum tax and new control mechanismsto ensure the correct taxation of corporate profits are presented.

A new revision of forms TPR-P and TPR-C has been published by the Finance Ministry in the Public Information Bulletin. The new forms are used to file transfer pricing information for tax years starting after 31 December 2019.

In Vietnam, the fiscal authorities have changed the process of APA conclusion in order to implement this instrument practically. The article outlines the key aspects of this development. 

Senegal is currently implementing several BEPS action items into local tax laws. Our colleagues explain which actions have been implemented and how these changes will affect companies.

Our colleagues in India provide information on the recently introduced regulatory changes concerning both procedural and tax compliance aspects of transfer pricing.

The article from Ghana sheds light on the newly established transfer pricing regulations, capturing some of the BEPS Action Items.

In China, the State Administration of Taxation has published a consultation paper that shortens the APA process to just three steps, allowing for a significantly faster processing time in order to provide tax certainty.

Chile’s tax court has ruled against the Chilean Tax Administration in a decisive case that could bring profound changes to the local transfer pricing regulatory framework. This case and its impact on taxpayers is outlined by our Chilean colleagues.

Brazil is known for not implementing the OECD Guidelines regarding transfer pricing. Now, new transfer pricing documentation requirements have been announced. This will require a significant effort, even though Brazil is already at a very high level in this respect.

Our colleagues from Argentina provide an overview of the new mandatory disclosure framework for domestic and international tax planning arrangements.

The UK government has opened a consultation process on changes regarding the transfer pricing documentation requirements valid in the UK. Our British colleagues explain the proposed changes.

The Polish tax authority has issued guidance on new documentation requirements for transactions involving tax havens. The article explains to what extent this has a practical effect for taxpayers.

In the Netherlands, the Dutch Ministry of Finance has published a draft proposal under which downward adjustments would be limited in order to address transfer pricing mismatches when applying the arm’s-length principle.

In Italy, new rules came into force regarding the structure, content and submission of the transfer pricing documentation. These changes apply to both the master file and the local file and have significant implications for the taxpayer.

Our colleagues in Hungary explain the current focus of the Hungarian tax authority at Hungarian subsidiaries of foreign companies under the aspect of transfer pricing following the COVID-19 crisis.

In Germany, the Federal Ministry of Finance has published the Administrative Principles 2020. These replace the version of 2005 to some extent, but there is a greater emphasis on procedural aspects.

In France, after half a century, the status quo of the tax regime regarding intangible assets is changed. Our French colleagues outline some of the principles behind the newly established “Nexus” approach.

In Austria, the draft of the revised Austrian Transfer Pricing Guidelines 2020 was published. Our Austrian colleagues outline the changes and consequences.

An update from 16 countries on recently introduced legislations and cases. In particular, the adoption of certain OECD guidelines. Additional developments in the field of transfer pricing, including the implementation of the BEPS into the laws of the various countries, are presented.

Melanie Appuhn-Schneider and Alexander Haller held a lecture on emerging transfer pricing issues in Germany at HEC Lausanne

The Vietnamese Government recently issued 2 decrees on TP: Decree 132/2020/ND-CP (Decree 132) dated 5 November 2020 which replaces Decree 20 and is valid for the fiscal year 2020 and Decree No. 126/2020/ND-CP (Decree 126) dated 19 October 2020.

On 18 August 2020, the Taiwan Ministry of Finance (MOF) announced draft amendments to the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on NonArm’s-Length Transfer Pricing (TP Assessment Rules).

Within the framework of the OECD Convention on Mutual Administrative Assistance relating to Taxation, Senegal has signed the Multilateral Convention called MLI.

Part 2 of the Income Tax (transfer pricing) Regulations 2018 (TP Regulations) focuses on compliance with the arm’s-length principle, Advanced Pricing Agreements and corresponding adjustments. Section 5 of the TP regulations clearly cites that in determining whether a transaction is compliant with the arm’s-length principle, such a transaction must be guided by the available TP methods as listed thereunder.

The Central Board of Direct Taxes (CBDT) issued a detailed Guidance on MAP in August 2020 for the process to be followed by an Indian Competent Authority (CA) and field officers, and comprehensive guidance on issues related to MAP processes.

Our colleagues in Costa Rica explain recent updates in local tax law affecting transfer pricing and provide three examples on how the tax administration has adjusted the mentioned decrees.

Chile’s Internal Revenue Service published Resolution 101, which incorporates two new affidavits regarding transfer pricing compliance, which must be submitted by the taxpayer in certain cases.

The Argentine Revenue Service has added new transfer pricing documentation requirements for operations with intermediaries. More specifically, the requirements for transfer pricing documentations have been extended with a focus on imports and exports through international intermediaries.

Our Ukraine colleagues explain Law 466-IX that has introduced comprehensive changes within the Ukrainian tax code, including the implementation of the BEPS three-tier reporting standard.

The Swedish Tax Agency has issued new guidance on financial guarantees. Swedish taxpayers can now rely on the OECD approach as suggested in Chapter X.

On 29 October 2020, China’s State Administration of Taxation released the “2019 Advanced Pricing Arrangement Annual Report” (2019 APA report).

In Spain, the settlement of tax disputes in the European Union has been implemented into Spanish domestic law.

In France, to deduct the full amount of intergroup interests, a French company must prove that the paid interests are not excessive. Our French colleagues outline some of the principles behind this regulation.

An update from 13 countries on recently introduced legislations and cases. In particular, the adoption of certain OECD guidelines. Additional developments in the field of transfer pricing, including the implementation of the BEPS into the laws of the various countries, are presented.

By joining the Inclusive Framework on Base Erosion and Profit Shifting on 2 June 2017, Thailand committed itself to the implementation of the BEPS minimum standards.

The new Law on Tax Administration (“LTA”), effective from 1 July 2020, strengthens the tax enforcement in Vietnam.

Pakistan shifted the focus of its Tax Authorities towards transfer pricing issues by introducing regulatory amendments concerning TP audits.

The contribution from Nigeria sheds light on the first transfer pricing decision of the Nigerian tax appeals tribunal and provides a brief outlook on what taxpayers should consider in view of their transfer pricing.

Since the beginning of 2020,reduced limitations on Taiwan’s “one-time transfer pricing adjustment” became effective, which helps enterprises to achieve an arm’s-length result even in times of unexpected market conditions.

Despite the modernised Income Tax Law and Tax Code, which has been published at the beginning of this year, Chile expects further practical and regulatory modifications due to the ongoing COVID-19 pandemic.

Our colleagues from Argentina provide an overview of the new transfer pricing regulations by summarising the six main aspects of GR4717.

Ukraine recently introduced new proportional adjustment rules, which could lead to a reduced risk of double taxation triggered by one-sided TP adjustments.

In an example, our colleagues from the Netherlands describe the field of tension in which the OECD regulations and Dutch tax laws on the deductibility of intra-company financing are currently moving.

In Italy, a new Legislative Decree came into force to ensure a more effective EU transfer pricing dispute resolution mechanism.

Hungary provided its taxpayers a four-month extension of their transfer pricing documentation and furthermore accepts a re-evaluation of the profit-loss model, due to the impact of COVID-19.

Typification of the arm’s length principle also applicable to domestic transactions? A comparison of tax consequences in cross-border and domestic cases

Our French colleagues explain what needs to be considered from a transfer pricing perspective in these times of COVID-19, especially with regard to documentation requirements, the use of benchmarking studies and the deductibility of interest expenses.

An update from 13 countries on recently introduced legislations and cases. Additionally, developments in the field of transfer pricing, due to the economic and social impact of the ongoing COVID-19 pandemic are presented.

An overview of recent decisions of the German Federal Fiscal Court, the final OECD guidance and Germany's bilateral position

An overview on the final version of the circular letter “Transfer Pricing” published by the Belgian Tax Administration (BTA)

WTS Global experst share their regional expertise in a comprehensive overview.

An overview of measures introduced in implementation of the EU directive on tax dispute resolution mechanisms.

Analysis from a holistic, transactional and overarching perspective. Summary Documents are available for download.

Although MNEs are currently facing challenges that are likely more pressing than taxation/transfer pricing, the current crisis may also provide opportunities in this field.