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The positions taken by the United States on transfer pricing remain greatly at variance with those of the majority of the OECD member states in general and Germany in particular. Multinational enterprises doing business in the United States should undertake the prospective analysis and record-keeping required under U.S. law and regulations to defend their transfer pricing structures and avoid U.S. penalties in the event of adjustment. The measures required here must largely be undertaken far in advance of a tax audit.

Despite the many differences between Germany and the United States, a common trend exists in that the German transfer pricing case law also compels the taxpayer to face the transfer pricing issue in advance, at least as regards his German marketing subsidiaries.

There is, however, little reason to suppose that Germany will make considerable revisions in its transfer pricing system in response to the new OECD Guidelines. The OECD Guidelines themselves, while a compromise document, are in part a plea for moderation directed at the United States. It remains to be seen whether the U.S. will heed this plea or apply its transfer pricing system in such a way as to lead to a wave of transfer pricing mutual agreement procedures or even major international conflicts.

APAs are a transfer pricing innovation originating in the United States. They may be suited to the needs of certain taxpayers, particularly those dealing with the more dangerous U.S. transfer pricing system. In Germany, APAs are available in theory but will probably be limited in practice, if for no other reason than because the German tax administration has limited resources to commit to such projects.

The new EU transfer pricing arbitration convention is the first of its kind in the world and an important positive development in transfer pricing law.

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