26 ITPJ JANUARY/FEBRUARY 2004 Transfer Pricing in Practice GERMANY Interpretation of the Arm's Length Principle under Art. of the OECD Model Tax Treaty: Does the Arm's Length Principle Cover Formal Requirements? Heinz-Klaus Kroppen' and Stephan Rasch2 1.INTRODUCTION the GmbH access to labs, offices, and production sites When auditing the transfer prices of multinational entities, of PPD in order to familiarize them with the technical the tax authorities have often based their findings on for- malistic, rather than substantive, arguments. On 16 July PPD granted for the term of the Agreement the right to 2002 he Lower Tax Court of Munich issued a decision use specific trademarks of P or certain specified regarding a German subsidiary of an Italian parent com- licensed trademarks6 in Germany for its products or pany. This ruling is of particular importance because it sale thereo relates to the Germcability ore ration of the arm's length PPD granted to the Gmb nces to the patents, registered mo and other and the international interpretation of Art. 9 of the OECD Is, advan- Model Treaty 2. TAX COURT OF MUNICH DECISION ent on the 2.1. Facts The issue in this case is whether payments that the plain- tiff, a German GmbH to own com- llation roup. Deloitte en de IR2703. are as follows see Eigelshoven and Nientimp, Der Betrieb 2003. at 2307. PPD agreed to provide full knowledge and, upon request of the Gmb he anne Listed in Table I of the annex to the Agreement. appropriately qualified personnel on a short Agreement, Part 7. to the GmbH, as well as to provide to the personnel of 9. ld.. Part 3. G2004 Internationai Bureau of Fiscal Documentation