Germany’s Constitutional Court Confirms OECD-Based Methods in Transfer Pricing Adjustments

27 May 2025

Germany’s Constitutional Court examined whether Section 1 of the Foreign Tax Act was constitutionally applied in a dispute involving Timber GmbH & Co. KG. The taxpayer challenged profit adjustments made by the tax authority, arguing that the use of OECD-aligned methods exceeded administrative discretion. 

The Court disagreed, holding that the comparable profits and resale price methods were appropriate tools for assessing the arm’s length nature of the company’s cross-border related-party transactions.

By endorsing the tax authority’s reliance on OECD methodologies, the Court reaffirmed Germany’s alignment of domestic transfer pricing rules with international standards.

The decision strengthens legal certainty around Germany’s use of established OECD methods and confirms that courts will uphold transfer pricing adjustments when taxpayers cannot demonstrate that internal prices reflect market conditions.

Read the Full English Translation Here: Germany vs "Timber GmbH & Co. KG", May 2025, Bundesverfassungsgericht, Case No 2 BvR 172/24 - TPcases