Transfer pricing documentation in international companies
Since 2013, the Federal Tax Court has declared the obligation that companies keep records about business relationships with related parties (e.g. allied companies) in situations involving a foreign element and disclose them to the German fiscal authorities to be in conformance with European law.
Record documentation obligations are extensively regulated. They encompass all the business and legal bases for an arm’s length-equivalent agreement on prices and other business terms and conditions with company-affiliated parties. At the same time, external tax audits in the last several years have increasingly focused on submission of so-called transfer pricing documentation. This documentation is regularly requested in order to check for any existing – and undesired – corrections of cross-border revenues or to verify whether the preconditions for a hidden profit distribution have been met.