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In general, domestic issues are not considered in this book, instead we focus on the international aspects of transfer pricing. However, in the following we provide an example on how German tax authorities may adjust income. If no double tax treat y is concluded, the case at hand will be assessed regarding the cross-border transactions by national tax law only. As a consequence of the examination of the appropriateness of the transfer prices, taxable profit adjustments may follow. There are various rules in German tax law for this purpose, such as

hidden profit distribution (Sec. 8 para 3 sent. 2 Corporation Tax Code)

hidden capital contribution (Sec. 4 para. 1 Income Tax Code in conjunction with Sec. 8 para. 1 and 3 of the Corporation Tax Code) and

adjustment of income (Sec. 1 External Tax Relations Act).

The profit adjustment can lead to a back-tax demand, to interest to be paid on it in accordance with Sec. 233a Fiscal Code and, if applicable, to penalty surcharges (e. g. Sec. 162 para. 4 Fiscal Code).