In recent years, the transfer pricing audit landscape in Germany has been characterized by tax authorities’ enhanced technical sophistication. Yet tax authorities have often felt constrained from implementing major income adjustments due to administrative limitations on the amount of collectable information and the degree to which they could use methods different from those used by the taxpayers to impose those adjustments. Considering this reality, the German Ministry of Finance has published updated administrative guidelines related to tax transfer pricing audits, which strongly influence the industry, especially in terms of tax audits.

In this article, published in the International Tax Review, NERA Managing Director Dr. Yves Hervé and Director Philip de Homont discuss the updates that are likely to have the most profound impact, the drastic change in the balance of power that may be experienced by taxpayers and tax authorities, and the outcome of tax audits in Germany.