24.4 Acceptable Methods in Germany 24-11 24.4 ACCEPTABLE METHODS IN GERMANY (a Standard Methods The comparable uncontrolled price(CUP)method is the method preferred by the german tax authorities Its application is in general consistent with the inter national standard. This method is in accordance with section 2. 6. of the OeCD Guidelines and with Treasury Regulations, Section 1. 482-3(b)(1) The resale price methoddescribed in the administrative principles is in dance with the method described in sections 2.14 to 2.31 of the oecd guic but the german tax authorities seem to be even more flexible than the U.S. Reg lations. Under the concept of the U.S. Regulations, it is not allowed to use the re- sale price method if the reseller adds substantial value(e.g, where the distributor uses its intangible property). The administrative principles do not limit the ap- plication of the resale price method in such a manner. If, for instance, the reseller purchases different radios from related and unrelated parties and sells the products transfer price to the related party mi mined by reference to the gross margin earned with the radio that is purchased from the unrelated party o. The cost plus method is used to determine the price for semi-finished goods, ng-term supply contracts(e. g. contract manufacturer), the provision of services and in some cases, for cost sharing arrangements. The starting point for the cost plus method is the costs of the manufacturer or the provider of the services. Applying the cost plus method the taxpayer is commonly confronted with two problems One problem in applying the cost plus method is determining what cost basis to use. The administrative principles seem to be very flexible as to this issue. The company should base the calculation of the transfer price on the pricing policy be- ing employed to determine third party prices. In the absence of third party transac tions, the company should alternatively use common business principles.There fore, the taxpayer may use a full or a partial cost approach. The partial cost can for instance be based on variable costs, direct costs, or cost of goods sold. The cost calculation does not have to follow accounting standards for the statu- tory books. The company may therefore choose to base the cost on actual cost, av erage cost, or standard cost, depending on what cost basis is most reasonable However, the administrative principles are very flexible as to the cost base. In prac tice, the tax authorities often require a full-cost approach based on actual cost. In See, in detail, Kroppen/Eigelshoven, in: IBFD: Tax Treatment of Transfer Pricing, Germany, pp 26 ff.; Bick, Vogele/Borstell Engler/Kotschenreuther, Handbuch der verrechnungspreise, pp 365 ff. 3See U.S. Regulations, 5 1.482-3(c)(1) in detail, Schnorberger, ITPJ 1999, pp. 56 ff. Kotschenreuther, in: vOgele/BorstellEngler/Kotschenreuther ach der verrechnungspreise, pp 382 ff