42 Transfer Pricing Wisdoms – Wisom No. 3

We started this column by doing a bit of transfer-pricing space traveling. But as we all know, experienced space cowboys also do some journeys through time – from time to time at least. Since similarities between the galaxy and the transfer-pricing-universe are galore, you shouldn’t be surprised about our next wisdom.


Transfer Pricing Wisdom No. 3: Don’t be afraid of time travel! 


In Startrek IV Admiral Kirk, Mr. Spock, Scotty and the other guys took the ‘Enterprise’ to travel from the 23rd century back to 1986 as they needed to fetch some whales and bring them back to where they had started. They didn’t want to eat original 1986 whalemeat (there’s nothing like an excellent “vintage year” for whalemeat), they needed the animals to communicate with an unknown satellite that was about to destroy our planet. And they had to go back to the 20th century because whales were extinct in the 21st. It worked! Earth was saved (or better: it will be saved in the 23rd century).

As we could see in the movie, time travel to 1986 wasn’t too much of a problem for 23rd century spaceships. But when it comes to transfer pricing in Germany, you have to go back to 1983 and all you have is 21st century technology. Today is just before the 25th anniversary of the basic rules on transfer pricing created by the German Finance Ministry: February 23, 1983. In Berlin there’ll probably be parades of German tax officers waving flags and singing anthems (I don’t know any tax officers’ anthems – Monthy Python’s “Accountancy Shanty” would be o.k.) and there’ll be speeches and champagne. Congratulations!

But for all of us who have to find our way through the transfer pricing universe applying the 1983 rules means time travel which isn’t always fun. We have to deal with the ideas of tax officers in a place named Bonn (the ancient German capital) about transactions put into regulations to be applied until the day the last whale would die. Even in 1983 this had been more ‘fiction’ than ‘science’ and today is 2018. Business models, types of transactions and economic processes within and between companies have changed a lot. But the 1983 rules shall still guide us to save our planet from the evils of base erosion and profit shifting. This is rather strange. Anyway – it’s not as strange as 1986 whales communicating with a satellite to prevent him from destroying the earth in the 23rd century. And this has worked (or better: this will work).

So just be mildly surprised like Mr. Spock on his visit to 1986 or see the funny sides of it like Admiral Kirk. And always remember that you should be lucky. You don’t have to carry whales through hundreds of years. You just have to apply some strange and dusty rules with little connection to your 21st century business. This may sometimes be difficult  but other enterprises have survived such journeys through time and still do. Therefore this week’s transfer pricing wisdom is: Don’t be afraid of time travel!

Soon – Transfer pricing wisdom No. 4: Use written agreements!