Context

As you know, the global salary cost of an individual seconded to Belgium is in principle fully deductible from the Belgian subsidiary’s taxable basis.

News

The German Ministry of Finance recently issued Administrative Guidelines on the transfer pricing issues linked to international transfers of personnel (Administrative Guidelines of 9 November 2001).

According to these new Administrative Guidelines, the German tax authorities consider that the global salary cost of an individual seconded to the German subsidiary of an international group shall not necessarily be fully deductible at the level of that subsidiary. If this salary cost exceeds the global cost that would be incurred upon recruiting a person with similar experience on the local market, the German subsidiary has to prove the reason and benefit it has in incurring this extra cost. If this evidence cannot be provided, the excessive part of the cost will be deemed to benefit the company that has seconded the individual to Germany, and therefore it will not be deductible at the level of the German subsidiary.