When transfer pricing does not reflect market forces and the arm’s length principle, the tax liabilities of the associated enterprises and the tax revenues of the host countries could be distorted. Therefore, OECD member countries have agreed that for tax purposes the profits of associated enterprises may be adjusted as necessary to correct any such distortions and thereby ensure that the arm’s length principle is satisfied. OECD member countries consider that an appropriate adjustment is achieved by establishing the conditions of the commercial and financial relations that they would expect to find between independent enterprises in comparable transactions under comparable circumstances.
TPG2010 Chapter I paragraph 1.3
Category: TPG2010 A. Introduction | Tag: Arm's length principle
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- TPG2022 Chapter I paragraph 1.3When transfer pricing does not reflect market forces and the arm’s length principle, the tax liabilities of the associated enterprises and the tax revenues of the host countries could be distorted. Therefore, OECD member countries have agreed that for tax purposes the profits...
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Related Case Law
- Malawi vs Eastern Produce Malawi Ltd, July 2018, Malawi High Court, JRN 43 af 2016Eastern Produce Ltd is part of Camellia Plc Group, and is is engaged in the growing, production and processing of tea in Malawi. The Malawi tax administration conducted a tax audit and found that transfer prices for intergroup service transactions had not been at arm’s...
- Costa Rica vs Corrugados del Guarco S.A., March 2018, Supreme Court, Case No 13-002632-1027-CACorrugados del Guarco S.A. had declared losses on controlled transactions for FY 2003, 2004 and 2005 as export prices for these transactions had been set below cost and without profit margin, and also different from the price charged for that product to other independent...
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