Intragroup Financial Transactions Under Increasing Scrutiny by Tax Authorities: A European Perspective Part II Several European tax administrations—particularly those of Spain, Germany, and the United Kingdom—are intensifying their scrutiny of intragroup financial transactions within the framework of transfer pricing rules and anti-abuse provisions. Germany: Elimination of the Presumption of Deductibility As of 1 January 2024, Germany has abolished the general presumption of deductibility for interest expenses arising from intragroup loans. Under the German Corporate Income Tax Act (Körperschaftsteuergesetz, KStG), in conjunction with Section 1 of the Administrative Principles on Transfer Pricing (BStBl I 2021, p. 527), taxpayers must now substantiate that their financing arrangements reflect arm’s length conditions and are grounded in a legitimate business rationale. This reform responds to growing concerns that many financial structures within multinational groups lack genuine commercial purpose and are designed primarily to erode the tax base. German tax doctrine emphasizes the importance of a business-driven interest (betriebswirtschaftliches Interesse) and rejects purely tax-motivated arrangements that deviate from market behavior. Tomorrow, we will provide more detailed comments on these cases in Europe. 🌍 PKF Transfer Pricing is a leading global provider of transfer pricing services, including advisory, documentation, and controversy support. If you would like to learn more about our services, feel free to send us a message.