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German Bundestag approves changes to German Transfer Pricing Law

On Wednesday afternoon the German Bundestag has debated and approved the Government draft of the Abzugssteuerentlastungsmodernisierungsgesetz (AbzStEntModG), which also includes significant changes to § 1 German Foreign Tax Code – the most important German Transfer Pricing Law.

As expected, the Bundestag approved the Government Draft in the version as recommended by the German Bundestag’s Financial Committee (“Finanzausschuss”), while all requests for changes and amendments submitted by the opposition parties were rejected. For a summary of the main elements of the new law we refer to our article on this topic published here earlier this week.

Since the Government draft did not include new specific rules for intercompany financing transactions, as suggested by the German Bundesrat, at least this aggressive measure of tightening German transfer pricing rules is of the table for now. It should however be considered that German Bundesrat also needs to approve the new law later this month.

Insofar it is still open how the Bundesrat will decide on May 27th. The Bundestag debate entirely circled around the main, not Transfer Pricing related, topic of the AbzStEntModG, i.e., measures to fight against harmful tax practices that captured the attention of German media in the preceding months, notably CumEx and CumCum. On a perhaps lighter note, the Bundestag found the time to debate a reduction of the German Beer Tax for smaller breweries (which is also contained in the AbzStEntModG). Transfer Pricing was only mentioned – in a side note – by the speaker of the Green Party who proposed to include the rules for financing transactions (which was rejected by all parties except for the Green and the Left Party). Both parties have some power in the Bundesrat, but it seems questionable whether they will indeed risk to delay or even block the Anti-CumEx measures only for introducing stricter transfer pricing rules.

We will keep you updated.

Dr. Klaus Dorner (Klaus Dorner Consulting, Hamburg/Germany)

Dr. Oliver Treidler (TP&C, Berlin/Germany)

Quantera Global Network Partners