Amendments to the German Regulation on the Attribution of Profits to Permanent Establishments (Betriebsstättengewinnaufteilungsverordnung) relating to Insurance Permanent Establishments
On 6 August 2025, the German Federal Ministry of Finance has published a ministerial draft containing several amendments to existing tax regulations.
Particularly relevant from a transfer pricing perspective are the proposed changes in Article 13 of the ministerial draft regarding the Regulation on the Attribution of Profits to Permanent Establishments (BsGaV), relating to insurance permanent establishments.
Key Changes:
The key changes focus on Section 25 of the BsGaV (Allocated Capital of Domestic Insurance Permanent Establishments of Foreign Insurance Companies, Insurance Supervisory Law) and include:
- Expansion of Capital Attribution Rules: Insurance permanent establishments in Germany must allocate capital as if they were independent insurance companies. The minimum capital equals the statutory minimum capital requirement and, under the “minimum capital adequacy method,” must generally be increased by 20%, unless a lower uplift results in an outcome that better reflects the arm’s length principle.
- Alignment with Commercial and Regulatory Law: The attributed capital must be adjusted if required by domestic insurance supervisory regulations.
- Clarification on Asset Allocation: If the allocated capital attributed to a domestic insurance permanent establishment by the foreign insurance company deviates from the capital that must be allocated pursuant to new rules, the assets attributed shall be adjusted by the amount of the difference.
A&M Perspective and Recommendations
The draft reform strengthens the rules on dotation capital for insurance permanent establishments. Capital must be allocated as if the permanent establishments were an independent insurer, with the minimum capital defined by supervisory law. Under the minimum capital adequacy method, this dotation capital must generally be increased by 20%, unless a lower uplift leads to an outcome that better reflects the arm’s length principle. Insurance companies should review their permanent establishment capitalization and transfer pricing models to assess potential impacts and ensure alignment with the revised attribution rules.
Source
The full draft is available at: 1-Referentenentwurf.pdf
