Transaction matrix after one year – practical application, deadlines, risks

Transaction matrix and documentation obligations since 2025 (section 162 Fiscal Code [AO])

With effect from 1 January 2025, the amendments introduced by the Fourth Bureaucracy Reduction Act (BGBl. 2024 I No. 323 of 29 October 2024) have been implemented in the German Fiscal Code. From a transfer pricing documentation perspective, particular attention should be given to the new record keeping requirement for the transaction matrix, defined as an overview of transactions realised during the relevant assessment period, as well as the statutory obligation to submit certain records without a separate request following notification of a tax audit.

This obligation applies to:

• the transaction matrix,
• the master file (where applicable), and
• documentation on extraordinary transactions (where applicable).

In addition, the tax authorities may request the local file at any time, generally subject to a submission deadline of 30 days (we refer to our Insight of 6 November 2024).

According to the explanatory memorandum, the transaction matrix is intended to facilitate a more risk-based audit of cross border business relations, in particular transfer pricing, by supporting the identification of audit focus areas and contributing to a more efficient audit process. Ultimately, it is intended to reduce administrative burdens for taxpayers.

Transaction matrix: administrative relief or additional effort?

The objective of reducing administrative burdens associated with the introduction of the transaction matrix is, in principle, to be welcomed. However, based on more than one year of practical application, it can be observed that implementation in practice has developed differently.

In practice, the tax authorities regularly request the local file (i.e. factual and arm’s length documentation pursuant to section 90(3) sentence 2 nos. 2 and 3 AO) shortly after notification of the tax audit, often almost simultaneously. As a result, the transaction matrix has typically not yet been evaluated, or only to a limited extent, and potential audit focus areas cannot yet be identified. Nevertheless, the taxpayer is already required to submit the complete local transfer pricing documentation.

At an initial stage, this may result in additional administrative effort, as a separate transaction matrix must be prepared alongside the local file.

Surcharge risks under section 162 AO and retrospective application

The obligation to submit the transaction matrix may also apply retrospectively to prior assessment periods where a tax audit initiated on or after 1 January 2025 covers periods before 2025. In addition, the submission or non‑submission of the transaction matrix is subject to a separate statutory surcharge. In the event of non‑submission, a surcharge of EUR 5,000 is imposed pursuant to section 162(4) sentence 1 AO.

It is not explicitly clarified whether the surcharge applies per assessment period or per transaction matrix. This uncertainty is reflected in the examples included in the transaction matrix guidance issued by the Federal Ministry of Finance on 2 May 2025, one of which illustrates a transaction matrix covering three assessment periods. Based on the systematic context of section 162 AO, it may be assumed that the surcharge applies per assessment period. Accordingly, where a tax audit covers three years, cumulative surcharges of up to EUR 15,000 may arise.

Arguments that submission of the local file alone should suffice in lieu of a separate transaction matrix are unlikely to be successful, as the surcharge for non‑submission of the transaction matrix is imposed automatically and is not subject to the discretion of the tax audit.

At present, there is no statutory provision, nor administrative regulation, that clearly defines the interaction between the local file and the transaction matrix. In particular, greater clarity could be beneficial in situations where the local file is requested shortly after, or simultaneously with, the notification of the tax audit. This could include, for example, clarification as to whether the obligation to submit the transaction matrix should cease in such cases, or whether the surcharge for non‑submission should be mitigated or waived. 

Conclusion

In light of the current statutory requirements and, in particular, the short submission deadline of 30 days, taxpayers may consider maintaining both a transaction matrix and a local file for all open assessment periods. In practice, local files are often already available for open audit years and can generally serve as a basis for preparing the transaction matrix. However, the transaction matrix explicitly requires information on whether transactions are subject to non‑standard taxation in the relevant jurisdiction, in particular the application of preferential tax regimes such as licence boxes. This information is not a mandatory element of the local file and cannot always be derived from it.

Given that information on the local taxation of transaction partners is not always readily available, this aspect may warrant particular attention. 

More generally, the 30‑day submission deadline makes it necessary to maintain transfer pricing documentation in a manner that is audit‑ready. This includes clearly defined responsibilities, identified data sources and processes that enable the timely provision of the transaction matrix and, where applicable, the local file, particularly for cross‑border transactions.

Taxpayers seeking support in reviewing or preparing their transfer pricing documentation may consider engaging specialist advice.