Image of Contemporary Application of the Arm’s Length Principle in Transfer Pricing


Contemporary Application of the Arm’s Length Principle in Transfer Pricing

This book outlines how the application of the arm’s length principle should be reconsidered in light of the initiative of the OECD and G20 to counter tax base erosion and profit shifting (BEPS). The arm’s length principle embedded in article 9 of the OECD Model is not an anti-avoidance rule and has been misidentified as the primary tool for tackling abusive practices. Transfer pricing analysis, commonly understood as examining economic substance, in reality examines whether related parties have the functional and financial capacity to perform the contracts they have entered into.rn rnThe notions of ownership, substance and commercial rationality are identified as controlling criteria for compliance with the arm’s length principle, which has its origin in contract law. This conclusion is reinforced with analysis of international court cases. Common intercompany arrangements of IP holding, cash pooling and debt factoring further suggest that the starting point of any transfer pricing analysis should be the identification of the mandatory terms of intercompany contracts. A template for contract analytics is therefore also provided.rn rnThe framework for contemporary transfer pricing analysis that is developed defines the boundaries of the arm’s length principle, with the objective of eliminating economic double taxation and neutralizing the effect of corporate income taxation on foreign direct investment. This book is unique in that it takes a legal approach to transfer pricing in the context of tax law. It can be consulted by transfer pricing practitioners, tax officials and academics alike in countries where the arm’s length principle based on article 9 of the OECD Model is endorsed in domestic law.

Detail Information

Call Number
23 CON mar
Publisher IBFD Publications : The Netherlands.,
xvi, 242 p, 23 cm
23 CON mar