German transfer pricing principles usually follow the OECD guidelines, especially the arm's-length principle. However, often specific additional formal requirements have to be fulfilled.

For administrative services the OECD guidelines apply the benefit test to evaluate whether the service provided is beneficial for the recipient and consequently whether under arm's-length circumstances a third party would be willing to pay for it. Therefore, the service must be beneficial for the recipient, should not be provided in duplicate and should not be more than the costs incurred if the service was to be provided or requested locally. Generally, shareholder activities do not qualify as a service. Direct charges are preferred for services provided directly, however in practice indirect allocation methods are often applied for a range of services, using several keys to allocate costs (and an additional arm's-length mark-up).

According to strict German tax (case) law certain formal requirements have to be fulfilled that otherwise at least shift the burden of proof to the taxpayer. These formal requirements are:

A written agreement should be in place that;