The German tax authorities (GTA) have updated their administrative explanations on Advance Pricing Agreements (APAs) providing guidance on how they interpret the APA legislation and operate the German APA Programme. Of particular note are GTA’s clarifications about the rejection of the APA application (in case of e.g. unilateral APAs, utilizing preferential tax regimes or non-compliance with duties to cooperate during tax audits, late fee payment). Unfortunately, the GTA has still not provided any specific timing targets for completing the APA process.

Key Clarifications

No Admission of Unilateral APAs

Consistent with our practical experiences, GTA explicitly confirm that in cases involving a tax treaty partner businesses must first seek an APA on a bilateral basis before seeking a unilateral APA. Moreover, unilateral APA shall not be issued in cases of transfer prices and the profit allocation of branches.

APA Access and Availability

Transfer pricing issues are usually the subject of an APA. However, it has now been clarified that other tax treaty issues can also be the subject of an APA (e.g. creation of a permanent establishment).

The initiation of an APA procedure is at the discretion of the GTA. The GTA should reject the initiation of an APA procedure if the business benefits from a preferential tax regime. Moreover, the initiation of the APA procedure could also be rejected if the business does not comply with its duties to cooperate during tax audits.

It is particularly relevant for German partnerships that the applicants are the partners and not the partnership itself, so that access to the APA depends on the residency of the partners.

APA Prefiling Meeting and Application

The typical process for a bilateral APA procedure starts with a prefiling meeting. The primary objective of a prefiling meeting is to assess whether the case in question qualifies for an APA procedure and to evaluate the probability of a successful outcome. Typically, the prefiling meeting will already indicate which factual information is particularly important for the GTA and should be presented in more detail in the application, especially to accelerate the process.

At the second stage, the business must file a formal application for the initiation of an APA procedure with the GTA (and to be expected also with the foreign competent authority); an application filed abroad only is not sufficient.

During the third stage, when the GTA is conducting negotiations with the competent authority of the tax treaty partner jurisdiction, the GTA can decide that the business should be physically present during the negotiation rounds.

APA Term, Extension and Roll-back

APAs are limited to a certain period of validity, which in should not exceed five years. The entire fiscal year could be covered by the APA for continuing transactions if the APA application is filed at some time during that fiscal year. For one-time transactions the application has to be filed prior to the transaction being realized.

If the business would like to renew an existing APA, it must formally request its renewal before the expiry of the existing APA. The GTA provide the prospect of a fast-track renewal if the facts in the APA period correspond to the facts in the years covered by the renewal.

The program also enables taxpayers to request “roll backs” of APAs to previous years if the facts in the relevant previous years correspond to the facts in the years covered by the APA. Formally, the period to which it is possible to “roll back” is limited in such a way that the deadlines for mutual agreement procedures (MAPs) of the relevant DTA must be observed. The GTA also suggest that a domestic appeal proceeding (for a roll-back period) should be suspended if the APA has relevance to it.

APA Compliance

The business is required to file an annual compliance report during the operation of the APA, which is in line with current practice. The GTA expect to see in the compliance report any deviations from the APA outcome, the underlying facts and the compliance with the critical assumptions agreed upon.


The GTA charge fees for processing each application (30,000 euros) and renewal application (15,000 euros), which must be paid before the APA procedure is initiated. The APA procedure is only initiated when the fee assessment has become incontestable, and the fee has been paid within one month after notification of its assessment. If the fee is not paid in due time, the APA application would be rejected, while the fee would remain due. Any amendments of the APA application do not trigger a new fee, unless the amendments are material.

Concluding remarks

APAs have become a popular instrument to obtain legal certainty on transfer pricing in Germany in recent years, reflecting the increasing complexity of transfer pricing faced by multinationals. The new guidance largely reflects current practical experience for businesses and practitioners engaged in APA processes with the GTA. It contains helpful clarifications that businesses who are contemplating an APA process should be aware of. For one-time transactions (e.g. transfer of functions) it must be kept in mind that the application has to be filed prior to realizing those transactions.