Corporate Tax Guide | CTGTP1 | October 2023
Arm’s Length Price: The price determined for a specific business transaction in accordance with the Arm’s Length Principle.
Arm’s Length Principle: The international standard that the Organisation for Economic Co-operation and Development (OECD) member countries and many other jurisdictions have agreed to use for determining transfer prices for tax purposes. The principle is set forth in Article 9 of the OECD Model Tax Convention as follows:
where conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. (OECD, 2017)
Business: Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or ex...