On April 2, 2025, the German Federal Ministry of Finance issued administrative guidance introducing the “Transaction Matrix” as a mandatory component of Transfer Pricing documentation. This measure, effective January 1, 2025, aims to strengthen transparency and facilitate tax audits through a structured filing of cross-border intercompany transactions.
What Is the Transaction Matrix?
The Transaction Matrix is a detailed chart summarizing all relevant transactions among related parties or permanent establishments in different jurisdictions to principally support risk-based case selection by tax authorities during audits.
Each entry of the Matrix should include the following:
- The type and nature of the Transaction (e.g., recurring supply of goods or services).
- The parties involved and their respective roles (indicating the supplier and the recipient).
- The volumes and remuneration in euros (e.g., the loan amount and interest or consideration for the supply of goods or services).
- The contractual basis (a reference to the document is sufficient without requiring the agreement to be attached).
In addition, economically comparable transactions can be grouped, and separate charts can be created according to the entity’s role (supplier vs. recipient).
Obligations and Deadlines
As of January 1, 2025, the Transaction Matrix must be filed within 30 days of receipt of an audit order, even if the audit refers to fiscal years before 2025, as long as the issuance is in 2025 or later. This obligation applies without the need for an additional request from the tax authority. In addition, the Transaction Matrix may be required aside from audit procedures, e.g., for requesting Advance Pricing Agreements (APAs).
Implications for Companies
Implementing the Transaction Matrix significantly changes the Transfer Pricing documentation requirements in Germany. Companies must ensure their accounting systems and processes can capture and report the required information accurately and timely. Failure to comply with these obligations could result in penalties and increased exposure during tax audits.
How to Prepare?
In order to comply with these new requirements, companies should:
- Analyze and update their Transfer Pricing policies and procedures.
- Implement efficient collection and reporting systems to file the required information.
- Train relevant personnel on the new requirements and procedures.
- Consult with Transfer Pricing experts to ensure compliance and reduce risks.
Source: Changes introduced through the amendment of Section 90(3) and (4) of the German Fiscal Code (Abgabenordnung, AO) under the Fourth Bureaucracy Relief Act (BEG IV).