Oecd Guidelines On Arm’s Length Principle Of Transfer Pricing

Many factors other than transfer pricing influence the profitability of multinationals, but transfer pricing is significant for both tax administrations and taxpayers because it affects the allocation of profits from intra-group transactions between the different tax jurisdictions in which a multinational operates. A large share of world trade consists of transfer of goods, intangibles and services within multinational enterprises. To determine tax liability in each jurisdiction, the right price (arm's length price) has to be applied, the Organization for Economic Co-operation and Development (OECD) has issued guidelines on this principle to avoid double taxation.

The following questions have been addressed in this article:

What is arm’s length principle of Transfer Pricing?
Do OECD Model Tax conventions encompass the arm’s length principle?


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