In accordance with paragraphs 1.64-1.69, it may exceptionally be appropriate for a tax administration not to recognise the parties’ characterisation or structuring of a transaction or arrangement where, having regard to all of the facts and circumstances, it concludes that:
• The economic substance of the transaction or arrangement differs from its form (Section C.2); or
• Independent enterprises in comparable circumstances would not have characterised or structured the transaction or arrangement as the associated enterprises have, and arm’s length pricing cannot reliably be determined for that transaction or arrangement (Sections C.3 and C.4).
Both of these situations are instances where the parties’ characterisation or structuring of the transaction or arrangement is regarded as the result of conditions that would not have existed between independent enterprises (see paragraph 1.66).