Transfer Pricing

Internal transactions within a company are generally settled with transfer pricing. In this regard, companies do not necessarily orientate themselves towards market conditions when determining the transfer price, i.e. supply and demand have no bearing for the most part; rather, the price is geared to and optimized for the business objectives. Transfer pricing then becomes relevant for tax law purposes if there is a (cross-border) exchange of services between associated companies. In cases with a foreign element, one also speaks of transfer prices.

In principle, deliveries and services between associated companies must be accounted for pursuant to the arm’s length principle as between independent market operators. The competent fiscal authority has several possibilities for reviewing the appropriateness of the agreed transfer prices. Either it uses a price comparison method, according to which the transfer price is compared with the current market prices, or, within the framework of the cost-plus method, the usual profit margins are added to the costs of the supplying company and the result is drawn upon for comparison.

If the outcome of the review by the fiscal authority is that the transfer prices are inappropriate, the profits are re-calculated having regard to adequate prices.  Transfer prices are increasingly being examined in external audits, resulting in significant adjustments to income. This will intensify over the coming years through the transposition of the EU Mutual Assistance Directive into national law by means of the Act of June 26, 2013, which improves transnational cooperation between fiscal authorities across Europe.

The wellbeing of the company and the associated businesses is at the forefront of day-to-day business operations. Operational concerns, for example supporting financially stricken subsidiaries, often necessitate setting transfer prices below the market price. However, tax regulation does not in principle allow for exceptions. Tax advisors and lawyers can support you in an advisory capacity both when assessing and reviewing transfer prices as well as in the event of any measures being taken by the fiscal authority.

Make an appointment at one of our locations in Cologne, Berlin, Dusseldorf, Frankfurt, Hamburg, Munich or Stuttgart! For International inquiries, please contact us at our offices in London or Singapore!
Locations
GRP Rainer Rechtsanwälte Steuerberater Köln
Gürzenich-Quartier
Augustinerstraße 10
50667 Köln
+49 221 2722750
+49 221 27227524
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GRP Rainer Rechtsanwälte Steuerberater Berlin
Kurfürstendamm 21
10719 Berlin
+49 30 544459880
+49 30 544459885
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GRP Rainer Rechtsanwälte Steuerberater Bonn
Friedrich-Ebert-Allee 13
53113 Bonn
+49 228 929599890
+49 228 929599895
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GRP Rainer Rechtsanwälte Steuerberater Düsseldorf
Königsallee 92a
40212 Düsseldorf
+49 211 993399920
+49 211 993399925
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GRP Rainer Rechtsanwälte Steuerberater Frankfurt
Skyper Villa
Taunusanlage 1
60329 Frankfurt am Main
+49 69 172979670
+49 69 172979675
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GRP Rainer Rechtsanwälte Steuerberater Hamburg
HafenCity
Am Kaiserkai 1
20457 Hamburg
+49 40 422369430
+49 40 422369435
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GRP Rainer Rechtsanwälte Steuerberater München
Maximilianstraße 35a
80539 München
+49 89 211298800
+49 89 211298805
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GRP Rainer Rechtsanwälte Steuerberater Stuttgart
Königstraße 10c
70173 Stuttgart
+49 711 988099810
+49 711 988099815
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Do you have any questions?
Make an appointment at one of our locations in Cologne, Berlin, Dusseldorf, Frankfurt, Hamburg, Munich or Stuttgart! For International inquiries, please contact us at our offices in London or Singapore!