Germany: The Changing Model of Group Financing Centres

19 April 2020
Yves Hervé, Philip de Homont and Georg Dettmann

In their most recent article, “Germany: The changing model of group financing centres,” published in International Tax Review, Managing Director Dr. Yves Hervé, Director Philip de Homont, and Senior Consultant Georg Dettmann explain why financing centres will be under increased pressure from national and supranational bodies. 

Following the issuance of the OECD’s “Guidance on Financial Transactions” in February 2020, there has been a major shift in the documentation requirements for financial transactions, as well as a great deal of uncertainty about whether “interest benchmarks” are still a valid transfer pricing method. In Germany, this transfer pricing method has been under attack from financial courts and a proposed law. 

The authors outline why this matter can have significant consequences for financing centres and taxpayers who have come to rely on such structures for their internal financing needs. They argue that the result could mean double taxation and increased controversy. The authors believe that while taxpayers should step up their documentation, many of the existing structures are commercially valid and valuable, and will continue to exist if properly documented. They also offer recommendations about what taxpayers can do to alleviate the situation with the help of tax firms.