Lower Courts Rule on Compatibility of Transfer Pricing Rules with EC Law

In February 2008, the Tax Courts of Düsseldorf and Münster rendered two judgments involving income adjustments based on Sec. 1 of the Foreign Tax Code (AStG) in which they expressed doubts about the compatibility of German rules with EC law. The Tax Court of Münster even held that Sec. 1 of the AStG is incompatible with the freedom of establishment. In this article, the author considers the two judgments and their possible implications.