Tax
05. Feb 2025
WP/StB Dr. Dietrich Jacobs

Transfer pricing documentation - Transaction matrix is required

As of 2025, due to a new legal regulation, a transaction matrix will have to be included in the country-specific transfer pricing documentation (the so-called local file) for Germany. Previously created overviews will likewise have to be adapted.

Overview of cross-border transactions

A company needs to use a transaction matrix to provide an overview of the cross-border transactions, realised during the reporting period, relating to Germany. This overview is intended to quickly facilitate initial orientation for the fiscal administration so that it can then subsequently determine risk-oriented focus areas for review. 

Requirements in terms of content and format

Detailed information as to the contents of the transaction matrix is available in neither the German Fiscal Code nor in the Ordinance on the Nature and Scope of German Transfer Pricing Documentation Requirements. However, from the preamble to the legislation it can be inferred that the following details need to be provided:

  • the subject and nature of the transactions,
  • the parties involved in the transactions, identifying the recipients of the goods or services and their providers,
  • the volume and remuneration of the transactions,
  • the contractual basis,
  • the transfer pricing method applied,
  • the tax jurisdictions concerned, and
  • an indication if the transactions are not subject to standard taxation in the relevant tax jurisdiction.

There are likewise no specific rules with respect to the format. However, the use of the term ‘matrix’ does suggest a clearly laid out tabular presentation. Within the scope of documentation, tabular overviews were already previously frequently created and referred to as transaction matrices.

Please note

Admittedly, such overviews frequently did not contain all the aforementioned information so that, in this respect, adaptations will need to be made.

All in all, a transaction matrix could thus look like the illustrative example that follows.

Transaction matrix

Transaction        
Object
and Type 		Delivery of electr. household appliances Contract manufacturing
services for electr. household appliances 		Support
services (IT, HR, accounting) 		Support
services (IT, HR, accounting)
Provider A GmbH C Ltd. A GmbH A GmbH
Recipient B Ltd. A GmbH B Ltd. C Ltd.
Volume 10,000 units 10,000 units 680 hours 680 hours
Remuneration (€) 200,000 150,000 50,000 50,000
Contractual basis Supply Agreement of 2.1.2023 Contract Manufacturing Agreement of 2.1.2022 Support Services Agreement of
2.1.2022 		Support Services Agreement of
2.1.2022
Transfer pricing
method used 		Transactional
net margin method 		Cost plus method Cost plus method Cost plus method
Tax juris-
dictions 		Germany / USA India / Germany Germany / USA Germany /
India
Standard
taxation? 		yes / yes yes / yes yes / yes yes / yes

First time application and deadlines

The transaction matrix has been a mandatory part of transfer price documentation since 1.1.2025. After receiving a tax audit notice, the transaction matrix - as well as the documentation of extraordinary transactions and the master documentation (master file) - must be submitted to the fiscal administration within 30 days without being specifically requested to do so. Moreover, irrespective of such a notice, the fiscal administration may request transfer pricing documentation (which thus must then also include a transaction matrix) both during and outside of a tax audit with a submission deadline of 30 days.

Please note

Therefore, transfer pricing documentation that has already been prepared might possibly need to be revised once again.

An overview of the main practical consequences

1. High preparation costs 
Groups and companies that are subject to the documentation requirement would usually be well advised to have transaction matrices with the aforementioned information ready to hand in order to be able to forward them to the local tax office after a tax audit notice has been issued. While compiling a matrix may look easy at first glance, ensuring its completeness and collecting data about the applicable tax regimes abroad, for example, might possibly entail considerable costs.

2. Submission deadline unrelated to an event and also shorter 
Furthermore, beyond the transaction matrix aspect, you should bear in mind that - as already mentioned - from now on the fiscal administration will be able to request transfer pricing documentation at any time with a submission deadline of 30 days; it will, for example, likewise do so within the scope of a tax audit after having reviewed the transaction matrices, insofar as the documentation does not in any case already have to be provided within 30 days after issuing a tax audit notice, without waiting for a request (please see above).

3. Precautionary measures are advisable

Up to now, it was the case that transfer pricing documentation generally had to be submitted within 60 days; therefore, shortening this deadline will, at the very latest, effectively force smaller groups and companies to also already prepare not only transaction matrices, but also transfer pricing documentation as precautionary measures and ‘on spec’. However, you should at least think about the extent to which you would be able to meet the new deadlines if you were to receive a tax audit notice or a request for transfer pricing documentation.