The German Federal Ministry of Finance (BMF) issued new transfer pricing (“TP”) guidance on June 6, 2023 with customs implications. Last year, Germany’s highest tax court issued its decision in the Hamamatsu case, ruling that both upward and downward lump sum retroactive transfer pricing adjustments, which occur after the decisive moment for customs valuation purposes, have no relevance for the customs value which shall only reflect the “real economic value” at the time of importation (here).
Both the old and new TP administrative guidance from BMF provides that businesses should notify the customs administration of upwards TP adjustments. This is deemed an obligation under sec. 153 of the General Tax Code: if a taxpayer recognizes that past tax declarations had been wrong and the mistake led to an underpayment of customs duties, the tax administration has to be notified of the errors and the tax declarations must be corrected. Therefore, if a business does not follow the notification and correction obligation, the general managers can be held criminally liable. In this regard, a “correction” can be made in two steps: first a notification and then followed by a submission of the data. It is important to note that while the guidance is not binding and its validity is questionable with a view to the Hamamatsu case law, the criminal aspects should receive serious consideration. With that in mind, based on the enforcement landscape in Germany, businesses should assess whether a notification obligation is triggered and a correction is warranted.