German BEPS Implementation Act and local files
By Prof Dr Kay-Michael Wilke, Benefitax GmbH
The German Parliament passed the BEPS Implementation Act in December 2016, which came into effect on 1 January 2017. This act serves the purpose of implementing BEPS Action Plan 13: “Transfer Pricing Documentation and Country-by-Country Reporting” and revises the existing obligations from back in 2003 to prepare a local file.
Besides describing business transactions, new obligations for the local file also include a description of the economic and legal basis for intercompany agreements that are in line with the arm’s length principle.
The documentation to be submitted within 60 days after a request by the tax auditor has been received. Written documentation is only required if the threshold of EUR 5 million intra-group turnover for deliveries or EUR 500,000 turnover for services has been exceeded. The same applies for parent companies and permanent establishments.
If the documentation is not submitted, is submitted too late or essentially does not meet the documentation requirements, the tax auditor can estimate the taxable profits. In addition, penalties of at least EUR 5,000 can be imposed. In the event of late filing of TP-documentation that meets the requirements, the surcharge may be up to EUR 1 million but at least EUR 100 per day.
Prof Dr Kay-Michael WilkeBenefitax GmbH, Steuerberatungsgesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, Germany
T: +49 69 256 227 60
Prof Dr Kay-Michael Wilke has been a presiding judge at a fiscal court and a lecturer at the German Federal Ministry of Finance. He lectures at Freiburg University, Baden-Württemberg Cooperative State University and Reutlingen University. He is the author of a large number of articles dealing with international taxation and has been a practitioner since the mid-nineties. Today he works as a lawyer and certified tax consultant, and supports Benefitax on a freelance basis for consultation on complex tax matters and fiscal audits, mainly dealing with international taxation, restructuring of groups and foundations.
Published: Spring 2017 l Photo: Colourbox.de