Germany publishes first official draft on separate entity approach for permanent establishments and other amendments to transfer pricing legislation

Tax Insights ()

On 5 March 2012, the German Ministry of Finance published an official draft for the "Jahressteuergesetz 2013" ("Annual Tax Law 2013") that contains various amendments on major German tax regulations, including Section 1 of the Foreign Tax Act ("FTA") that is the core section on transfer pricing matters.

The aim of the expected adjustments to Section 1 of the FTA is an approximation of German transfer pricing regulations towards the OECD standard as well as the harmonization of the attribution and distribution of profits in cross-border transactions for different types of investment (e.g. corporation, partnership, permanent establishment).