Recently, there has been a worldwide trend towards stricter documentation requirements for transfer pricing. We would like to inform you about the recent changes that have taken place in Germany.
With effect from 1 January 2025, multinational groups with companies domiciled in Germany should have transfer pricing documentation prepared in time to be able to submit it to the German tax authorities at any time, but no later than 30 days. The time limit has thus been halved from the original 60 days. The obligation to submit transfer pricing documentation within the reduced 30-day period also now exists outside the tax audit and applies, for example, to cases where a request for a binding assessment has been submitted.
This is a response to the DAC 7 Directive and the related efforts of the German tax administration to modernise and speed up tax procedures. The DAC 7 Directive aims to improve tax transparency and cooperation between EU Member States, in particular in the area of information on income generated through digital platforms. As a result, the German tax authorities will no longer issue a separate request for documentation when initiating a tax audit. The shortened deadline of 30 days also applies retroactively to tax years that ended before 1 January 2025 and have not yet been audited. The obligation applies both to the documentation of the entire group (MASTERFILE) and to the local documentation of the audited company. This obligation will therefore affect both German companies and Czech parent companies with subsidiaries in Germany
Failure to meet the deadline for submission of documentation, or submission of documentation in an insufficient scope or format, will be considered as a failure of the taxpayer to comply with the obligation to provide the tax administrator with cooperation within the tax audit. In such a situation, the taxpayer faces significant financial penalties which can reach up to EUR 250 000. If the transfer pricing documentation is applicable but submitted late, the penalty is EUR 100 per day of delay. The maximum fine imposed for late submission of documentation may be EUR 1 million.
In addition to the penalties for failure to provide documentation, the tax administrator is obliged to estimate the taxpayer's income in the absence of documentation or its unusability, based on the existence of a legally rebuttable presumption that such income is higher than the income already declared. Finding the evidence needed to rebut the tax administrator's presumption can be very challenging in the absence of documentation.
In order to avoid difficulties in documenting the actual income earned by multinational corporations operating (not only) in the online environment of the digital world, it is essential have regularly updated transfer pricing documentation prepared no later than the date of the financial statements. In the case of Czech subsidiaries whose German parent company will be preparing the documentation for the entire group (MASTERFILE), we recommend that the Czech local documentation be prepared so that it is consistent in time and substance with the group documentation
Autor: Lenka Lopatová
With effect from 1 January 2025, multinational groups with companies domiciled in Germany should have transfer pricing documentation prepared in time to be able to submit it to the German tax authorities at any time, but no later than 30 days. The time limit has thus been halved from the original 60 days. The obligation to submit transfer pricing documentation within the reduced 30-day period also now exists outside the tax audit and applies, for example, to cases where a request for a binding assessment has been submitted.
This is a response to the DAC 7 Directive and the related efforts of the German tax administration to modernise and speed up tax procedures. The DAC 7 Directive aims to improve tax transparency and cooperation between EU Member States, in particular in the area of information on income generated through digital platforms. As a result, the German tax authorities will no longer issue a separate request for documentation when initiating a tax audit. The shortened deadline of 30 days also applies retroactively to tax years that ended before 1 January 2025 and have not yet been audited. The obligation applies both to the documentation of the entire group (MASTERFILE) and to the local documentation of the audited company. This obligation will therefore affect both German companies and Czech parent companies with subsidiaries in Germany
Failure to meet the deadline for submission of documentation, or submission of documentation in an insufficient scope or format, will be considered as a failure of the taxpayer to comply with the obligation to provide the tax administrator with cooperation within the tax audit. In such a situation, the taxpayer faces significant financial penalties which can reach up to EUR 250 000. If the transfer pricing documentation is applicable but submitted late, the penalty is EUR 100 per day of delay. The maximum fine imposed for late submission of documentation may be EUR 1 million.
In addition to the penalties for failure to provide documentation, the tax administrator is obliged to estimate the taxpayer's income in the absence of documentation or its unusability, based on the existence of a legally rebuttable presumption that such income is higher than the income already declared. Finding the evidence needed to rebut the tax administrator's presumption can be very challenging in the absence of documentation.
In order to avoid difficulties in documenting the actual income earned by multinational corporations operating (not only) in the online environment of the digital world, it is essential have regularly updated transfer pricing documentation prepared no later than the date of the financial statements. In the case of Czech subsidiaries whose German parent company will be preparing the documentation for the entire group (MASTERFILE), we recommend that the Czech local documentation be prepared so that it is consistent in time and substance with the group documentation
Autor: Lenka Lopatová