Definition
A
deal between two interrelated or enterprise associates parties. That is
behavior as if they were not related, so that there is no query of a
disagreement of attention. In simple way we can describe this as “a deal
between two unconnected or associate parties”.
The
concept of an arm's length deal is to make sure that both associates in the
transaction are behave in their self attention and are not issue to any force
or pressure from the other associate.
Calculating ALP
OECD
introduce the transfer pricing guidelines for multinational enterprises and tax
administrations in 1995. OECD guidelines are appreciated globally. In the
transfer pricing system, the transfer pricing has to be resolute on the basis
of the arm’s length principle so price determined is the Arm’s Length Price
(ALP). According to the ALP there are two type of transfer pricing methods
Traditional Transaction Methods
Transactional profit methods or Non Transactional Methods
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