24.3 Relevant Principles to Derive the Arm's Length Price 24-7 (e) Article 9 of the Tax Treaties Germany has an extensive treaty network with more than 70 countries. Germany has agreed to the use of the arm,s length principle in virtually all its tax treaties. The tax treaties are not directly applicable to the taxpayers as such, but the treaty provisions have to be converted into federal law. Therefore, once the statutes have been enacted, the tax treaties principally have the same legal equality as domestic gislation Since treaty law is lex specialis to domestic law, it is argued that article 9 of a tax treaty limits the application of domestic tax law. The tax administration seem ingly expressed a different view in the administrative principles. According to sec- tion 1. 2. 1. of the administrative principles, the allocation provisions of german tax law also remain applicable in those cases of related interest that are not covered by he allocation provisions of the tax treaties The administrative principles argue that it would be inconsistent with the sense and purpose of the tax treaties if the treaty prevented income adjustments required by the particular case. However, if this view was correct, article 9 would have no legal effect, since domestic law would govern the rules on how to allo- cate the income. Obviously, this approach would circumvent the intention of the tax treaties 24.3 RELEVANT PRINCIPLES TO DERIVE THE ARMS LENGTH PRICE (a) Comparability Analysis The comparison of transactions between related and unrelated parties is the cor- nerstone for applying the arms length standard. It is critical for the comparison that the transactions between related and unrelated parties be generated under the same or similar conditions. All factors affecting the transfer price should therefore be taken into consideration(e. g, functions, risks, contractual terms, markets). Dif- ferences may influence the prices between related and unrelated transactions. In OECD Guidelines and the U.S. Regulations ag that event, it is necessary to adjust the prices accordingly. The administrative prin ciples basically give a wide variety of possible factors that might require an ad- justment. The German view is very similar to the comparability standards under the However, in practice, it is often decisive to what extent the tax authorities be- lieve that adjustments are necessary and how such adjustments can be made This analytical process often results in the application of different methods across te Schaumburg, Internationales Steuerrecht, Pp, 25 ff Sicker, in: Debatin/Wassermeyer, Doppelbesteuerung, article 9 MA, n, 185 ff. Kroppen, in: Becker/Kroppen, le verrechnungspreise, n. w13 ff. 20 See OECD Guidelines 55 1.15-1.35; U.S. Regulations, 5 1.482-1(d)