Sec. 1 of the Foreign Relations Tax Act (AuÇensteuergesetz or AStG) contains the general basis for applying Germany's transfer pricing regime and the rules for determining income from cross-border transactions between related parties. In 2008, the AStG was amended by adding new Sec. 1(3), which contains rules on the transfer of business functions abroad and authorizes the Ministry of Finance to issue regulations for applying the new rules. This article discusses the main aspects of new Sec. 1(3) AStG and the regulations issued by the Ministry of Finance in May 2008.