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Transfer pricing (TP) practitioners often face issues of intellectual property (IP) asset migration during business restructurings. The standard procedure is to specify the transaction in an asset purchase agreement, prepare a valuation of the assets to be transferred, and prepare TP documentation to show that the determined value is at arm’s length.

With the introduction of the German Foreign Tax Act in January 2022, Germany replaced TP-adjacent legislation from 2008. The new law reduces the time in which tax authorities can impose retroactive price adjustments to seven years, defines threshold values for when tax authorities can conduct retroactive price adjustments, and specifies circumstances in which taxpayers can justifiably argue for no retroactive adjustments. The law also broadens the definition of intangibles to include intellectual values and benefits, rather than merely IP assets.

In their recently published International Tax Review article “Developments in the Valuation of Intangible Transfers and Retroactive Price Adjustments in Germany,” Managing Director Dr. Yves Hervé and Associate Director Dr. Jens Rubart explain how the German Foreign Tax Act affects retroactive price adjustments and the definition of intangibles.