177. Transfer Pricing: Secret Comparables and Comparable Profits Methods in Germany

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At the time of the publication of the new 1995 OECD Guidelines, the German tax authorities were quick to issue a press statement declaring that "the Federal Republic of Germany considers the traditional methods to be adequate" and will not employ profit-oriented methods "except for purposes of verification [of another method] or estimation."

However, high officials in the German tax administration are known to have since had second thoughts on this matter. In a German language article (IStR 1999, 304) and again in the April 1999 issue of International Tax Review, Thomas Borstell and Michael Prick presented what they correctly identified as an important transfer pricing decision by the Düsseldorf Tax Court. It would appear to be the first reported court case in which the tax authorities have attempted to apply a comparable