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Mr Alexander Vögele
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In August 2000, Germany issued proposed regulations governing transfer pricing documentation requirements and other procedural matters. In mid-April 2001, a revised draft (dated March 2001) was forwarded by the Federal Ministry of Finance to the tax authorities of the German states. The March 2001 draft has not been released to the public and was not available as of the editorial date of this article (30 April 2001). The German national and state tax authorities are known to be in substantial agreement on the terms of the regulations, which satisfy most states, but apparently do not go far enough for some.
The August 2000 draft of the proposed regulations is the subject of articles 211 and 212. Adoption of the August 2000 draft with some rewording, but without material changes, appeared probable and imminent at the time these articles were written.
According to unofficial information, the primary difference between the August 2000 draft and the still confidential March 2001 draft is that the latter no longer requires contemporaneous preparation of special transfer pricing documentation. The regulations are still in a state of flux, however.
Taxpayers are advised to follow the drafting process closely, all the more as the proposed regulations contain no transition provisions and, once finalised, will apply in principle to all open audits.
The draft transfer pricing documentation regulations should be seen in the broader context of Germany's efforts to modernise its transfer pricing machinery to better defend its share of tax revenues in a global economy. The other noteworthy developments in this context are:
- issuance of new cost-sharing regulations in December 1999 (see article no. 200)
- enactment of "electronic audit" provisions as part of the summer 2000 tax reform package and issuance of draft implementing regulations (see article 213).
A translation of the August 2000 draft transfer pricing documentation regulations is available upon request.
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