08.04.2025Ministry of Finance issues guidance on “transaction matrix” transfer pricing documentation requirement
Transaction matrix requirement introduced in order to support a more risk-oriented field audit approach
On 2 April 2024, the German Ministry of Finance published a decree that provides guidance on the requirements of a “transaction matrix,” which contains information on a taxpayer's cross-border business relationships with related parties and permanent establishments and is a required part of transfer pricing documentation under section 90 paragraph 3 of the Fiscal Code (AO). The transaction matrix was introduced by the Fourth Bureaucracy Relief Act, which is effective as from 1 January 2025, in order to support a more risk-oriented field audit approach.
The main contents of the decree are summarized below.
What must be included in the transaction matrix?
The transaction matrix must contain the following:
- Subject and type of business transaction, e.g., delivery of goods;
- Parties involved in the business transaction, including identification as service recipient or service provider;
- Volume and consideration in EUR of business transaction, e.g., loan volume, interest, or consideration for delivery of goods/services;
- Contractual basis (the contract does not have to be attached);
- Transfer pricing method applied, such as cost plus method or comparable uncontrolled price method;
- Jurisdictions involved in the transaction; and
- Deviations from standard taxation, e.g., in the case of preferential tax regimes, such as IP box regimes.
Transactions may be grouped if they are economically comparable. Deviations in the form, content, or scope of a transaction matrix may be permitted by the tax authorities (upon a taxpayer’s request submitted within 30 days after receipt of a tax audit announcement).
The following table provides an example of a transaction matrix, which is provided in an annex to the decree:
When does the transaction matrix need to be submitted?
As from 1 January 2025, a transaction matrix must be submitted (without a request from the tax auditor) within 30 days after receipt of a tax audit announcement (along with, where applicable, a master file and documentation for extraordinary business transactions).
For tax audit periods prior to 2025, a transaction matrix must be submitted only if a tax audit announcement is issued in 2025. The decree provides the following example:
- A tax audit is planned at company X in 2025 for the years 2019 to 2022. The taxpayer receives a tax audit announcement for the years 2019 to 2022 on 10 March 2025. In this case, a transaction matrix (and, if applicable, a master file and documentation for extraordinary business transactions) must be submitted for this tax audit period within 30 days of 10 March 2025 (i.e., by 9 April 2025) without a separate request from the tax auditor.
If no income tax matters are audited (e.g., in the case of special VAT audits or wage tax audits), a transaction matrix must only be submitted upon specific request.
In addition, a local file is required as part of the transfer pricing documentation, which must be provided within 30 days upon request by the tax auditor.
What are the penalties for nonsubmission?
If a transaction matrix is not submitted, a penalty of EUR 5,000 will be imposed in accordance with section 162 paragraph 4 sentence 1 of the AO. This penalty is intended to ensure compliance with the new documentation requirements and is independent of other potential tax consequences.
Deloitte Germany comments
In order to meet the stricter requirements, more taxpayers seem to be automating their data processes in a structured manner, including:
- Identifying uniform data sources and defining standards;
- Identifying clear rules to derive the necessary aggregated information for the transaction matrix from raw data; and
- Defining standardized output formats that meet regulatory requirements and facilitate further data analysis.
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