Germany’s Ministry of Finance released a decree outlining the requirements for the “transaction matrix,” a new component of transfer pricing documentation under section 90(3) of the Fiscal Code (AO) on 2 April 2024.

The transaction matrix must detail cross-border transactions with related parties or permanent establishments. It must include the type of transaction, parties involved, value and consideration in euros, contractual basis, transfer pricing method, jurisdictions involved and any deviations from standard taxation.

Economically similar transactions may be grouped, and modifications may be allowed upon request within 30 days of a tax audit notice.

Starting 1 January 2025, the matrix must be submitted automatically within 30 days of receiving a tax audit announcement. For audits covering earlier years, the matrix is required if the audit is initiated in 2025 or later. If no income tax matters are under review, the matrix is only needed upon request. A local file must also be provided within 30 days upon request by the auditor.

Failure to submit the transaction matrix may result in a EUR 5,000 penalty under section 162(4) AO. If usable documentation is submitted after the deadline, a late filing penalty of up to EUR 1 million may be imposed, with a minimum of EUR 100 per day (see Section 162(4), sentence 4 AO). The final amount is determined at the discretion of the tax authorities.

The requirement, introduced through the Fourth Bureaucracy Relief Act, takes effect from 1 January 2025.

Earlier, the Fourth Bureaucracy Relief Act, brought major updates to transfer pricing documentation requirements in Germany.