The German government took the opportunity of the 2008 corporate tax reform to introduce significant changes to the arm's length principle, along with a number of other income and general tax code changes. In addition to the special amendments in the area of relocation of functions, the changes include amendments that refer to the choice of transfer pricing methods and its application, as well as to the conditions of the so-called hypothetical arm's length test. The authors highlight the major changes referring to the German transfer pricing rules and present a critical review.