Trapped in the (transaction) matrix: The BMF information sheet on new transfer pricing documentation (2025)

Despite new tariffs, trade wars and political tensions, the global economy is more interconnected than ever. A growing number of companies are operating across national borders in an attempt to withstand international competition. In this market environment, transfer pricing is becoming increasingly important. Transfer pricing refers to the terms on which companies provide services or deliver goods to related parties. If these transactions are not at arm's length, profit adjustments are made, see Section 1 para. 1 Foreign Tax Act (Außensteuergesetz). The law requires transfer pricing documentation to be prepared to enable the tax authorities to verify this.

In addition to the tightening of documentation requirements that has already taken place, the legislator has extended these with effect from 1 January 2025 to include the so-called transaction matrix. This is intended in particular to speed up external audits. There has been a great deal of uncertainty about the exact requirements for the matrix. The Federal Ministry of Finance (BMF) has now issued its first statement on this matter in its information sheet on the transaction matrix (IV B 3 – S 0225/00019/004/009) as published on 2 April 2025.

I. What is the new legal situation regarding transfer pricing?

The documentation requirement set out in Section 90 para. 3 of the German Fiscal Code (Abgabenordnung, “AO”) now comprises three components:

• the newly introduced transaction matrix,
• the documentation of the facts, and
• the documentation of the appropriateness of the transfer price.

The DAC 7 Implementation Act of 2022 already amended the reporting obligation under Section 90 para. 4 AO with effect from 1 January 2025: Firstly, the tax authorities’ competence to request documentation at any time, even outside the scope of an external audit, was strengthened (previously, this was only possible in the context of an external audit). Secondly, the deadline for submitting the documents was reduced from 60 to 30 days. Section 90 para. 4 AO was revised again as part of the introduction of the transaction matrix. A breach of the obligation to submit documentation may result in the imposition of a penalty surcharge of at least EUR 5,000 (Section 162 para. 4 AO). 

II. What are the requirements for a transaction matrix?

The law describes the transaction matrix rather vaguely as an "overview of business transactions" (Section 90 para. 3 sentence 2 no. 1 AO). In contrast, the BMF's information sheet is somewhat more specific: 

"The transaction matrix is a structured, tabular overview containing relevant information on the taxpayer's cross-border business relationships with related parties and permanent establishments."

This wording indicates that the tax authorities impose both formal (table format) and content-related requirements (relevant information) on the documentation. 

The BMF information sheet contains two (tabular) templates for the transaction matrix (template 1 for one fiscal year and template 2 for several fiscal years). As these templates are not legally regulated in terms of form, content or scope, it is generally possible to deviate from them (especially with regard to past commitments with the tax authorities). If there is no previous commitment but a deviation is desired, consultation with the tax authorities should take place immediately.

According to the BMF information sheet, a (deviating) transaction matrix should always contain the following information:

1. the subject matter and nature of the business transactions (e.g. delivery of goods and ongoing transactions), 
2. the parties involved in the business transactions, identifying the recipient and provider of the services, 
3. the volume and remuneration (in euros) of the business transactions (e.g. loan volume and interest or remuneration for a delivery of goods or services), 
4. the contractual basis (name of the contract document), 
5. the transfer pricing method used (e.g. cost plus method or price comparison method), 
6. the tax jurisdictions concerned, and 
7. whether business transactions are not subject to standard taxation in the relevant tax jurisdiction. This is the case if a so-called tax preference regime applies.

This list can be found verbatim in the explanatory memorandum to the law (Bundestag printed papers 20/13015 dated 25 September 2024). Only the explanations in brackets in the list are new. 

Furthermore, the BMF refers to the simplification regulated in Section 2 para. 3 Profit Accrual Recording Regulation (Gewinnabgrenzungsaufzeichnungs-Verordnung), which allows comparable business transactions to be recorded as groups. 

III. What has changed in the submission requirement as a result of the transaction matrix?

While the obligation to submit documents pursuant to Section 90 para. 4 sentence 2 AO (old version of the DAC 7 Implementation Act) originally applied to all documentation in the event of an external audit, only the following documents now have to be submitted to the tax office (Section 90 para. 4 sentence 3 AO, new version):

• the transaction matrix (Section 90 para. 4 sentence 2 no. 1 AO), 
• any necessary master documentation (Section 90 para. 3 sentence 3 AO), and
• the records of unusual business transactions.

IV. How should the transaction matrix and the BMF information sheet be assessed?

Although the information sheet is short, it is relevant in practice: 

• Firstly, the documentation requirement covers all new business transactions from 1 January 2025.
• Secondly, business transactions conducted in previous years are also covered if a request or audit order has been issued by the tax authorities (from 1 January 2025 onwards). If a transaction matrix has not yet been created, the taxpayer must do so retrospectively (or arrange for it to be done). This must be considered both in ongoing consultancy work and in due diligence, for example.

From an economic policy perspective, the introduction of the transaction matrix can certainly be viewed critically, as it primarily creates additional bureaucratic work for companies without providing any clear added value. Ultimately, it merely summarises information from the existing documentation on the facts and appropriateness, which continues to form the core content of transfer pricing documentation. Additionally, the scope of application has been extended to previous years, which was unnecessary.

The law attempts to compensate for this by stipulating that, in the event of an external audit, the entire transfer pricing documentation no longer needs to be submitted (in the first place). However, as the transaction matrix is the product of this documentation, the claimed reduction in bureaucracy is doubtful. This is because, in individual cases, the tax authorities may request taxpayers to submit the additional documents.

Ultimately, the threat of a penalty surcharge for non-compliance remains. The clarifications provided by the BMF do little to address this. Companies are therefore advised to comply with the documentation requirement on an ongoing basis even before an audit order or a request for submission is issued.

Special thanks go to our trainee lawyer Christian Müller for his valuable support in preparing this article. 

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The above information is for informational purposes only and does not constitute legal or tax advice.