Germany’s Federal Council (Bundesrat) passed the Fourth Bureaucracy Relief Act on 18 October 2024 following its approval by the Bundestag (lower house of parliament) on 26 September 2024.
One key aspect of the Act is that it reduces administrative burdens by shortening the retention period for accounting documents from 10 to eight years.
According to German tax laws, accounting documents are maintained for the same duration as annual financial statements. It was proposed to standardise retention periods for invoices and certain documents to six years per German tax laws, but this was not reflected in the legislation.
The Act also brings changes to transfer pricing documentation. This involves revising documentation requirements to include: a new transaction matrix overview, factual business transaction documentation, and transfer pricing method documentation in line with arm’s length principles. The new transaction matrix details business transactions, including their nature and subject, involved parties, volume and pricing, contractual basis, transfer pricing method, relevant tax jurisdictions, and taxation status.
Revised transfer pricing documentation requirements state that documents must be submitted within 30 days of the request. Documentations must also be submitted during an external audit and should include the transaction matrix, master file, and extraordinary business transaction records.
The Fourth Bureaucracy Relief Act will be published in the Official Gazette and the tax measures will take effect on 1 January 2025.
