Transfer Pricing 2025: Why European Authorities Expect Real-Time Data – and How to Manage It

Why the rules are changing right now

Transfer pricing is one of the largest sources of tax disputes in Europe, concerning the allocation of profits across different countries. In 2025, there was a noticeable increase in tax audit activity in Germany, Poland, Spain, and other countries as tax authorities seek to recover missing revenue. Traditionally, these disputes were resolved months or years after tax returns were filed. When data is scattered across spreadsheets, emails, and various systems across multiple entities, tax authorities cannot quickly verify whether prices truly adhere to the arm's length principle, which is the cornerstone of international taxation.

New transfer pricing documentation requirements in Europe stem from the OECD's initiative and specifically from the BEPS (Base Erosion and Profit Shifting) project, which aims to prevent multinational corporations from shifting profits to lower-tax jurisdictions. The goal is to reduce gaps in tax strategies and ensure that profits are taxed where value is created. Directives such as DAC6 (on mandatory disclosure rules for cross-border arrangements) and Country-by-Country Reporting (CbCR) now require data to be available faster and in a structured, digitally processable format.

A new, fundamental element, however, is precisely this: near real-time data . It is no longer sufficient to provide complete transfer pricing documentation with a long delay after the end of the financial year. Authorities now expect companies to be able to provide proper data on controlled transactions continuously throughout the year, in a digital format, integrated with their ERP systems, and ready for immediate inspection. This change represents a significant shift from a retrospective to a proactive approach in tax compliance.

What's changing in practice: New documentation requirements

Shift from static documents to dynamic data deepening

Traditionally, transfer prices were documented in extensive compilations at the end of the year, often in Master File and Local File formats. This documentation included a description of transactions, comparability analysis, and justification for the chosen method. It was a static library – created once, submitted once.

Now, this model is changing. European tax authorities, particularly in Italy, Germany, and Belgium, are introducing mandatory digital formats and continuous reporting that require ongoing transparency. Companies must be able to generate an up-to-date overview of their intercompany prices and dealings at any time – not once a year, but continuously, monthly or quarterly. The SAF-T (Standard Audit File for Tax) standard is one of the tools that allows for structured mapping of accounting data directly from ERP systems, and its use is spreading across Europe, for example in Poland and Portugal.

In Denmark, a fundamental change occurred in 2025. The Danish parliament approved legislation simplifying transfer pricing documentation requirements for smaller entities, while increasing transparency for larger ones. The threshold for full documentation increased, but data digitalization and the ability to provide it on request remained mandatory. Similarly, in the Czech Republic and other countries, companies are expected to integrate transfer pricing into their regular financial processes – not as a separate year-end tax activity.

MicroFAQ:

1. Why is SAF-T important? SAF-T enables standardized and structured export of accounting data directly from ERP systems, facilitating automated analysis by tax authorities and serving as a key to fulfilling "real-time" data requirements.

2. How do rules differ in individual countries? The basic principles are derived from the OECD, but each country may have its specific thresholds, formats, and deadlines. It is critical to monitor local legislation and practices.

Data specifications that tax authorities require

New requirements are not just about data volume, but about its specificity and interconnectedness across different jurisdictions . Tax authorities now want to know:

• The specific identity of counterparties in each transaction (not just aggregated amounts by type of trade).

• The country of residence of each counterparty and its role in the transaction.

• The type of controlled transaction (often from a prescribed list – in the Czech Republic, for example, categorization according to OECD or specific local authority categorization, typically over 30 categories, is recommended).

• The exact amount and its impact on profit and tax base in each affected entity.

• The history of changes and justification of pricing policy, including records of all adjustments and why they occurred.

• The consistency between contractual terms (intercompany agreements) and actually realized operations.

All this must be displayed uniformly, preferably in a digital format supported by structured data schemas. Companies that still keep information in Excel sheets and paper files are particularly vulnerable, as such data is difficult to audit and hardly proves adherence to the arm's length principle.

Operational transfer pricing (OTP) takes center stage

Until recently, transfer pricing was often perceived primarily as a tax matter – forms prepared by the tax team and tax advisor at the end of the year. Now, this is radically changing. Finance departments must take responsibility for the daily implementation of transfer prices. This means that prices must be recorded correctly in ERP systems, adjustments must be made if key factors change (e.g., market conditions, costs), and communication about these prices between entities in different countries must be transparent and consistent.

Operational transfer pricing (OTP) is becoming a critical process that requires cooperation across the entire organization – from sales, through finance and IT, to the tax department. When a tax authority comes with an inquiry and asks for data, it no longer wants to hear: "The data is scattered across various systems." It wants to see one consistent, up-to-date picture, underpinned by a functional and continuous process.

Practical situation: How it works in the real world

Example: European distribution company with headquarters in Germany

Imagine a company headquartered in Berlin that purchases products from its factory in Poland and sells them to distributors in the Czech Republic, Austria, and Slovakia. For each transaction route, transfer prices are determined, typically with a certain margin. Until now, all data was collected at the end of the year: invoices, margins, costs, and then documentation was prepared.

In 2025 and especially now in 2026, authorities are looking at this process differently. The German tax authority wants to see how prices were actually applied month by month. If anomalies appear – for example, if the Czech distributor's margin sharply increased in March without justification in the contract or market conditions – the authority wants to know immediately, not in December. Similarly, the Polish and Czech authorities want to see how their entity proceeded according to policy and what happened when the situation changed.

Without a centralized system that tracks this data in real-time and contains the history of decisions, documentation quickly gets out of control. Discrepancies arise between what is written in the tax return and what is in the accounting records. The reasons for price changes are unclear. A tax audit, instead of a mere check, becomes a battle over the burden of proof, with the potential for significant penalties across multiple jurisdictions.

Common mistakes we see in practice

In practice, companies often:

• Store data in different systems and lack a unified view of intercompany transactions across the group.

• Do not have sufficiently documented decisions regarding price adjustments and policy changes.

• Cannot quickly and consistently explain why a margin deviated from policy, or why it differs between countries.

• Cannot prove consistency between contractual terms (in intercompany agreements) and what actually happened and is accounted for.

• Commonly discover errors and inconsistencies only during a tax audit – which is too late for proactive solutions.

These problems are not just administrative. They can lead to substantial tax assessments, penalties, and long, costly disputes with authorities, which, moreover, often run concurrently in several countries.

How transfer prices work in Europe: Principles and legislation

All European countries adhere to the arm's length principle, which originates from the OECD. This means that the price between related parties (e.g., a parent and subsidiary company) must be such as independent parties would agree upon under the same or comparable conditions. This prevents companies from artificially lowering profits in high-tax countries and increasing profits in low-tax countries.

Documentation of this principle traditionally consists of three tiers according to the OECD Guidelines, which are implemented into national legislation and practice:

• Master File – contains global information about the multinational group, its organizational structure, business strategy, and general transfer pricing policies.

• Local File – detailed information about individual controlled transactions (services, sale of goods, licenses, etc.) carried out in the given country and their compliance with group policy.

• Country-by-Country Report (CbCR) – an aggregated overview of revenues, profits, taxes paid, and economic activity in each country where the group operates.

In the EU, DAC6 further requires the reporting of certain aggressive tax schemes, including those that may manipulate transfer prices. Companies must report these cross-border arrangements within 30 days of their implementation, further increasing pressure for timely and digitized record-keeping.

In the Czech Republic, Germany, Poland, and other countries, local specifics are added to these general rules. In Germany, for example, transfer pricing review is one of the most frequently audited areas – the audit focuses on distributions, services, and licensing of intangible assets, with increasing emphasis on data continuity.

How AI and technology help manage new requirements

Automating data collection and analysis

New requirements would be almost impossible to meet efficiently if companies still operated predominantly manually. This is where AI and modern technologies come in as key helpers.

Modern platforms, such as Anywhere.legal, enable:

• Automated data collection from ERP systems – pricing and transaction data are regularly and automatically exported and stored in a structured format, ensuring consistency across entities.

• Anomaly detection – AI monitors when prices, margins, or volumes deviate from set policies or market references, automatically flagging them, often in real-time.

• Immediate reconciliation – transaction data between individual entities in different countries are automatically compared, and any discrepancies are indicated for quick rectification.

• Easier report preparation – documentation (Master File, Local Files) is generated from a central data source, reducing manual work and eliminating errors, rather than being assembled from dozens of fragmented files.

Companies that deploy these technologies see a reduction in the time needed to prepare documentation by up to 50 percent, while simultaneously increasing quality and defense against disputes, which is crucial in the context of proactive audits.

Example: Using AI for documentation review and coordination

When a tax authority from one country sends suggestions or information requests, which may contain dozens of pages, AI can quickly process these documents, find key questions and topics, and help the tax team prepare consistent and relevant responses. This saves time and reduces the risk of inconsistent information being provided across jurisdictions, which could have serious consequences.

Similarly, AI can help with comparable data analysis. Instead of manually searching databases and filtering data, preparing a benchmarking study now takes significantly less time and is more accurate, thanks to AI's ability to process and evaluate vast amounts of data.

Table of risks and solutions with Anywhere.legal

Practical steps for the coming months

For companies with intercompany transactions in Europe, now is the right time to act to avoid problems in 2026 and beyond:

• Map the current state : What are the current transfer pricing policies? Where is the data stored? Is it harmonized across the group and jurisdictions?

• Identify source systems : Which ERP and accounting systems contain relevant data? Can these systems export data in standardized digital formats like SAF-T?

• Assess risk : Which industries, transactions, and geographic areas are most important and risky for the tax authority? Where is the greatest likelihood of audit or reassessment?

• Plan for digitalization and automation : It doesn't have to be done all at once, but there should be a clear and realistic plan for the next 6-12 months that focuses on automating data collection and processing.

• Engage the right multidisciplinary team : Without the cooperation of finance, tax, legal, and IT teams and experts from various jurisdictions, the transformation of transfer pricing to "real-time" management cannot be achieved.

Why it pays to master automation and structure now

Tax authorities will not wait. In Germany, Spain, Poland, and the Czech Republic, audits specifically target transfer pricing, and the number of controls is increasing with growing demands for transparency. Companies that have clean, structured data and unambiguous documentation available in real-time will pass audits faster and with less risk. Others will find themselves in a position where the tax authority can arbitrarily choose and propose its own calculation, leading to tax reassessments and penalties, which are often multiplied in a cross-border context.

Technology and AI are not just accessories – they are now essential tools for effective compliance and risk minimization in transfer pricing. It would be unwise to wait with their deployment until the first tax audit arrives. Anywhere.legal offers a platform that combines technology, AI, process management, and a network of international experts to help you tackle these challenges proactively and securely.

Need international legal or tax help with transfer pricing management and compliance with new requirements? Get in touch with us via Anywhere.legal.

FAQ

3. Must my company be prepared for real-time transfer pricing reporting?
       That depends on your country, size, and the nature of your cross-border transactions. However, the trend is clear: in countries like Germany, Belgium, and Poland, requirements for structured and continuously available data are becoming stricter. If you have controlled transactions and revenues above certain thresholds, you should expect data to be available digitally and in near real-time. It is optimal to start preparing now rather than being caught off guard during an audit.

4. How does Country-by-Country Reporting differ from Local Files?
       CbCR is an overview at the level of the entire multinational group – it shows aggregated revenues, profits, and taxes paid in each country where the group operates. It serves as a tool for tax authorities to analyze risks. A Local File, conversely, is detailed documentation of specific controlled transactions (e.g., sale of goods, services, licenses) and comparability analyses for a specific entity in a given country. CbCR serves as a first signal for the tax authority where it might conduct a detailed audit, and the Local File then serves as a defense for individual transactions.

5. Can I set a transfer price once and then not change it?
       In principle, yes, if the operating environment, market conditions, or functions and risks of the entities do not change. In practice, however, the market is constantly moving, margins change, new products emerge, or economic conditions shift. Transfer prices should be at least reviewed annually and adjusted if necessary. If tax authorities do not receive an explanation for changes or inconsistencies over time, it becomes a target for audit and challenge.

6. What are the most common transfer pricing errors that authorities in Europe monitor?
       Among the most common errors are: failure to perform or outdated functional analysis, poor selection of comparable entities or databases, missing justification for price changes, inconsistency between contractual terms (intercompany agreements) and actually realized transactions, missing or outdated intercompany agreements, and insufficient documentation of transfer pricing decisions. Furthermore, it is now the inability to provide data quickly and in a digitally processable format.

7. Will an Advance Pricing Agreement (APA) help us?
       An APA (Advance Pricing Agreement) is an agreement with the tax authority that pre-determines the method and manner in which transfer prices will be calculated for future transactions, usually for 3-5 years. It is a complex and time-consuming formal process (often taking years), but if you have high risks or significant and recurring cross-border transactions, it is worth considering as it provides legal certainty and reduces the risk of future disputes. For example, the US tax authority (IRS) concluded 110 APAs in 2025, indicating activity in this program.

8. How do approaches differ in various European countries?
       While the basic principles (arm's length principle) are the same and stem from the OECD, local thresholds for mandatory documentation, specific reporting formats (e.g., SAF-T in Poland and Portugal, or Danish simplification for small entities in 2025) and the practices of tax authorities vary significantly. Germany is known for its strictness and detailed audits, while other countries may have different priorities. Without knowledge of local rules and approaches, you will make mistakes. Here, collaboration with a local expert from the given country is beneficial, which is precisely what Anywhere.legal facilitates.