The Fourth Bureaucracy Relief Act, which goes into effect on 1 January 2025, brings major updates to transfer pricing documentation requirements in Germany.

This latest amendment brings the following changes:

• Transfer pricing documentation must be submitted within 30 days of receiving the tax audit notification or upon request by the tax authority, whether during a tax audit or not. Previously, it was required within 60 days and only during a tax audit.
• The implementation of a new “transaction matrix” is now an essential element of transfer pricing documentation.

Germany’s government has introduced the Fourth Bureaucracy Reduction Act after it proposed to extend the deadline for taxpayers to submit detailed transfer pricing documentation, and to revise the guidelines for how companies compile information for audits.

One key aspect of the Act is reducing administrative burdens by decreasing the retention period for accounting documents from ten to eight years. The draft bill seeks to introduce a comprehensive legislative package designed to ease the burden of unnecessary bureaucracy on the economy, citizens, and administrative processes. The draft legislation also proposed to simplify and streamline processes while preserving essential protection standards.

Another aspect of the Act is it introduces various recording obligations including documenting business transactions (transaction matrix and transaction documentation), outlining the economic and legal basis for agreements, and providing transfer pricing details, including timing, methods, and comparative data, in line with the arm’s length principle.

Earlier, on 18 October 2024, Germany’s parliament passed the Fourth Bureaucracy Reduction Act, and it was published in the Official Gazette 29 October 2024.