Transfer pricing documentation: New information sheet on the transaction matrix

On 2 April 2025, the German Federal Ministry of Finance (“BMF”) published an information sheet on the transaction matrix, clarifying the revised requirements for transfer pricing documentation as part of the Fourth German Bureaucracy Reduction Act (Viertes Bürokratieentlastungsgesetz, “BEG IV”). 

New structure of transfer documentation

As explained in our blog post from 21 October 2024, the structure of transfer pricing documentation has been fundamentally revised as part of the BEG IV. It now mandates a three-part subdivision of the country-specific, company-related documentation (i.e. the Local File), which includes:

• Overview of business transactions (transaction matrix),
• Presentation of business transactions (factual documentation), and
• Presentation of the economic and legal basis for complying with the arm’s length principle (documentation of the appropriateness of the transfer pricing method, arm’s length analysis).

As a new central component of the documentation, the transaction matrix provides a structured tabular overview of cross-border business relationships, which has already been used to some extent in tax audit practice.

As of 1 January 2025, due to the enactment of BEG IV, a shortened submission period of 30 days from the announcement of the general audit order applies to the transaction matrix, the master documentation of the multinational group (i.e. the Master File), and records of exceptional business transactions. 

The remaining parts of the comprehensive transfer pricing documentation must be submitted only upon a separate request within 30 days. Such a request can be made both during the announcement of a general audit order and during an ongoing tax audit.

Central components of the transaction matrix and practical requirements for companies

The transaction matrix is used for the systematic presentation of cross-border business transactions between related parties or permanent establishments. According to the BMF information sheet, a transaction matrix must contain the following elements:

• The nature and subject matter of the transactions (e.g. delivery of goods, services) (a),
• The parties involved in the transactions, specifying the provider/supplier and recipient (b),
• The volume and pricing of the transactions in euros (e.g. loan volume and interest or remuneration for the delivery of goods or services) (c),
• The contractual basis (d),
• The transfer pricing method applied (e),
• The tax jurisdictions involved (f), and 
• Information on deviations from standard taxation, for example in the case of preferential tax regimes such as license boxes (g).

Preparation of the transaction matrix: guidance and simplifications

Pursuant to Section 2 para. 3 of the Ordinance on the Documentation of Profit Allocations (Gewinnabgrenzungsaufzeichnungsverordnung, “GAufzV”), it is possible to aggregate economically comparable business transactions with a related party or permanent establishment into groups and present collectively within the transaction matrix.

Provided that the required information is included, companies have the flexibility to customize the format of the transaction matrix. The BMF offers two non-binding examples in the annex of the information sheet which serve as a guidance.

In addition, it is possible to claim deviations from the requirements if agreements on the structure of the transaction matrix have already been reached with the tax authorities in the past, for example as part of a follow-up audit. However, these deviations must be applied for and justified in advance or at the latest within the 30-day period following the announcement of the general audit order.

Entry into force of the new requirements and impending sanctions for non-submission

The new requirements apply to all external audits, which were initiated from 1 January 2025. An audit order issued in 2025 regularly covers audit periods prior to 2025, requiring the preparation of a transaction matrix for those earlier periods as well. A separate request for submission is required for audit orders issued prior to 1 January 2025.

Special audits involving foreign income tax matters, such as special VAT audits, do not automatically mandate the submission of transfer pricing documentation. In these instances, the transaction matrix, the Master File, and records of extraordinary business transactions must be submitted only upon separate request.

Beyond external audits, tax authorities may request the transfer pricing documentation and the associated transaction matrix independently at any time, thereby initiating a 30-day deadline. This may occur, for example, as part of an advanced pricing agreement procedure.

If the transaction matrix is not submitted within this timeframe, a one-off surcharge of €5,000 is imposed. This penalty appears moderate compared to other tax penalties, but it should be noted that late or incomplete submission may lead to further audits and additional inquiries.

Conclusion and recommendations for action

The fact sheet on the transaction matrix provides valuable clarity regarding the required components and structure of the transaction matrix. It also specifies the potential sanctions for non-submission and the application period.

While the transaction matrix was originally introduced to reduce the compliance burden on taxpayers, in practice, it may present new challenges for companies – especially in gathering and preparing specific information such as the contractual basis and taxation in the counterparty country.

It is therefore advisable to take proactive measures to fulfil these new requirements, including:

• The identification and structured documentation of relevant business transactions, 
• Ensuring the timely availability of all necessary information, and 
• Coordinating with the tax authority in case of deviations from the guidelines.

The flexibility granted in presenting the transaction matrix and the option to group economically comparable business transactions are welcome relief. Nevertheless, the timely and accurate preparation of the transaction matrix remains a key success factor in avoiding sanctions and in appropriately responding to potential inquiries from the tax authorities. 

We are pleased to advise you on the implementation of the transaction matrix and assist you in the preparation of your transfer pricing documentation.