Applying the Arm’s Length Principle to High-Risk and Low-Risk Financing/Treasury Entities – A Case Study

This article analyses how the Transfer Pricing Guidance for Financial Transactions are implemented in German law and the new Administrative Principles on Transfer Pricing 2021 and in which points they may differ. In this respect, it first considers the arm’s length test of transfer prices for financial transactions within the group according to the OECD and compares the result with the new Administrative Principles on Transfer Pricing 2021. As a second step, a case study is presented that exemplifies the divergences between the German administrative interpretation and the international standards of the OECD.