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. Effective January 1, 2025, this measure seeks to strengthen transparency and facilitate tax audits through a structured presentation of cross-border intercompany transactions.
What is the Transaction Matrix?
The Transaction Matrix is a detailed table summarizing all relevant transactions between related parties or permanent establishments in different jurisdictions. Its main purpose is to support risk-based case selection by tax authorities during audits.
Each entry in the matrix must include:
- 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., loan amount and interest, or consideration for the supply of goods or services).
- The contractual basis (a reference to the document is sufficient; it is not necessary to attach the agreement).
In addition, economically comparable transactions may be grouped together, and separate tables may be created according to the role of the entity (supplier vs. recipient).
Obligations and Deadlines
Starting January 1, 2025, the Transaction Matrix must be submitted within 30 days of receiving an audit order, even if the audit relates to fiscal years prior to 2025, provided that the order is issued 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 outside of audit procedures, for example, in the context of Advance Pricing Agreement (APA) requests.
Implications for Businesses
The implementation of the Transaction Matrix represents a significant change in Transfer Pricing documentation requirements in Germany. Companies should ensure that their accounting systems and processes can capture and report the required information accurately and in a timely manner. Failure to comply with these obligations could result in penalties and increased exposure during tax audits.
How to Prepare
To comply with these new requirements, companies should:
- Review and update their Transfer Pricing policies and procedures.
- Implement systems that enable the efficient collection and presentation of the required information.
- Train relevant personnel on the new requirements and procedures.
- Consult with Transfer Pricing experts to ensure compliance and minimize 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).