German reform of transfer pricing rules which took effect on January 1 has created a much tougher regime for taxpayers. Germany has never been an easy place to defend transfer prices. With the passage of this new regulation, it has become even tougher. Consequently, taxpayers must pay further attention to transfer pricing documentation in Germany if they are to avoid sanctions.  The German government introduced tax reform legislation that substantially modifies its transfer pricing legislation, which was originally introduced in 2003. The draft legislation, issued in early 2007, was subsequently approved in July 2007 and was enacted effective on January 1 2008.