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International Transfer Pricing 

Over the past few years the determination of appropriate transfer prices has become a burning international taxation issue for small- and medium-sized companies with international connections.  

Far-reaching changes to tax legislation for non-residents, which came as part of Germany's Corporate Tax Reform Law 2008, mean that transfer prices are again at the centre of the tax debate. In Germany, the shift of a company's operation(s) abroad is subject to taxation. This tax will now also affect small- to medium-sized enterprises with international connections.   

From as early as 2003, rules have been in force that make it compulsory for internationally affiliated companies to have verifiable documentation on transfer prices. In April 2005, Germany's Federal Ministry of Finance published its communication entitled 'Administrative Principles Procedure' which explains how this documentation should be prepared.  

For breaches of this new record-keeping duty, auditors can stipulate penalties of between 5% and 10% of the proceeds of the business deal, with a minimum penalty of €5000. Plus, a delay in the presentation of the required documentation could result in penalties of up to €1 million.   

New focus for auditing  

Even small- and medium-sized companies that operate internationally will, in future, have to make arrangements for the following:   

  • Arm's length pricing for products and services transferred between affiliated companies  
  • Reliable and appropriate allocation methods  
  • Outsourcing  
  • Extended workbench  
  • Shifting of operations and business opportunities  
  • Cost allocation  
  • Licences, knowledge transfer  
  • Management services  
  • Allocation of IT services  
  • Place of business issues  
  • Staff work assignments (tax and social security)  
  • VAT 

Thanks to the help of RWT's expert 'International Transfer Pricing' team, we are able to support you in the following areas:  

  • 'Quick scan' of your existing goods and services transfers with recommended courses of action  
  • Planning and implementation of new transfer pricing systems tailored to mid-size companies  
  • Creation of more robust transfer pricing documentation  
  • Defence of transfer pricing system against domestic and foreign tax authorities 
 

 


Contact Us
Wolfgang Kirschning
Reutlingen, Germany
+49 7121 489-265


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