Transfer Pricing: Significant Tightening For Financial Transactions And Services

On 22 March 2024, the Ger­man Fe­deral Coun­cil ap­pro­ved the Me­dia­tion Com­mit­tee's com­pro­mise pro­po­sal on the Growth Op­por­tu­nities Act. As a re­pla­ce­ment for the ori­gi­nally in Ger­many plan­ned in­te­rest rate cap, which was re­mo­ved from the draft bill, new re­gu­la­ti­ons for cross-bor­der fi­nan­cial tran­sac­tions and ser­vices will the­re­fore be in­tro­du­ced from the 2024 tax pe­riod (Sec­tion 1 (3d) and (3e) For­eign Tran­sac­tions Tax Act (AStG)).

Sec­tion 1 (3d) AStG, as amen­ded by the Growth Op­por­tu­nities Act, is ex­tre­mely re­le­vant in prac­tice for the de­duc­tion of in­te­rest ex­pen­ses by in Ger­many lo­ca­ted com­pa­nies of mul­ti­na­tio­nal en­ter­pri­ses (in the fol­lo­wing: MNE) if the com­pany lo­ca­ted in Ger­many is the re­ci­pi­ent of fi­nan­cing pro­vi­ded from ab­road (in­bound fi­nan­cing). Sec­tion 1 (3d) AStG re­gu­la­tes the con­di­ti­ons un­der which in­bound fi­nan­cing that re­sults in (in­te­rest)