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About the transfer pricing consulting services
Germany, Europe’s largest economy, hosts over 1.900 Japanese companies (including subsidiaries, branches, and representative offices), which operate in various business sectors such as sales and manufacturing. In this regard, it is essential to understand the transfer pricing regulations, which are rules designed to determine whether transaction prices or profit margins in cross-border related-party transactions are appropriate. Like other countries, German tax authorities actively scrutinize transfer pricing during tax audits. If they determine that transfer pricing has not been applied appropriately, the risk of additional tax assessments and penalties increases significantly.
For Japanese companies to achieve stable business operations in Germany and avoid tax risks, establishing and ongoing monitoring of transfer pricing strategy are essential. Our transfer pricing specialists will provide optimal support tailored to your needs. Please feel free to contact us.
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Frequently asked Questions
Frequently asked questions about Transfer pricing consulting services
Q. We don’t know how to create a local file.
A. To create a local file, we first need to thoroughly understand your business operations. By conducting client interviews in Japanese (or German/English depending on the clients’ needs), we specialize in creating local files that accurately capture the facts.
Q. We, a Germany-based Japanese subsidiary, are engaged in the purchase/sales of products as well as providing services to related parties. What are the key points to consider regarding transfer pricing?
A. Under transfer pricing rules, each transaction is generally examined individually. Therefore, it becomes necessary to segment your income statement into two transactions, namely (a) purchase/sales, and (b) provision of services. Please feel free to contact us regarding, for example, how to allocate the overhead costs to each transaction.
Q. What are the topics most likely to be raised regarding transfer pricing during a tax audit?
A. Tax authorities scrutinize whether profits earned align with the company’s actual business. If not, the reasons will be thoroughly investigated. Typical topics are as follows:
- Company reports consecutive losses.
- While the profit margins of the parent company and other overseas affiliates have remained stable, profit margin of the German subsidiary has fluctuated significantly.
- The extent to which companies contribute to profit generation is not reflected in the transfer pricing policy.
If you have any questions, please do not hesitate to contact us.