New transfer pricing documentation regulations as of 1 January 2025

According to the new transfer pricing documentation regulations, in the future, some records will have to be submitted without a separate request for submission. Instead, the obligation to submit records will be automatically triggered by the announcement of the tax audit order. The following documents must be submitted:

• Without request and within 30 days of the notification of the tax audit order:
  • Transaction Matrix,
  • Documentation of extraordinary business transactions and
  • Master File, if applicable (for entities meeting the relevant thresholds¹).
• Upon separate request, within 30 days of notification of the request for submission:
  • Company-related documentation ("Local File").

Originally, from 1 January 2025, the Local File would also have had to be submitted without request after the tax audit order. This regulation no longer applies. It has been reversed.

When to submit what?

The following overview shows which regulations apply in which period.

Content of a Transaction Matrix

From 1 January 2025, the so-called Transaction Matrix will supplement the previous two-tier system of Local File and Master File. The law does not define the scope of the Transaction Matrix. In principle, documentation obligations are specified in the Ordinance on the Documentation of Profit Allocations (GAufzV). The GAufzV has not yet been adapted to the new rules and according to reports, this will not happen in the short term. For now, taxpayers can only take into consideration the explanatory notes to the new law to determine the scope of a Transaction Matrix. According to the explanatory notes, a Transaction Matrix should contain the following information:

1. Subject and nature of the transactions;
2. Parties involved in the transactions, identifying the service recipient and service provider;
3. Volume and remuneration for the transactions;
4. Contractual basis;
5. Transfer pricing methods applied;
6. Tax jurisdictions affected;
7. Whether transactions are not subject to standard taxation in the relevant tax jurisdiction.

A Transaction Matrix could look like the following example (the taxpayer is D GmbH):

Sanctions for non-submission and late submission of the Transaction Matrix

From 1 January 2025, a fine of at least EUR 5,000 will be imposed for the failure to submit the Transaction Matrix (see Section 162 (4) sentence 1 General Tax Code). If the Transaction Matrix is submitted late, a fine of up to EUR 1 million may be imposed (the minimum amount is EUR 100 per day). The exact amount of the surcharge is at the discretion of the tax authorities.

Recommendations for action

The shorter submission deadlines make a timely preparation of documentation more challenging. We recommend reviewing and, if necessary, adjusting your transfer pricing documentation strategy. The Transaction Matrix, Master File, and records of extraordinary transactions require particular attention, since these now have to be submitted within 30 days of a tax audit order. Timely documentation of extraordinary transactions is crucial, although their classification may be complex. We are happy to assist you on this matter. If an audit order is (or has been) issued this year, we recommend checking carefully which documents need to be submitted as well as the deadline. The table above may help you getting started.

1 Companies that are part of a multinational group of companies and whose turnover in the previous year amounted to at least EUR 100 million.

* * * *

Click here to read the German version.