Arm's length principle enables profit reallocation where controlled transactions differ and mandates reciprocal tax adjustments between partners.

Where enterprises of contracting States are associated by participation in management, control or capital, or by common persons, conditions differing from those between independent enterprises permit inclusion of profits in taxable income under the arm's length principle. If one State includes and taxes such adjusted profits already taxed in the other State, that other State shall make an appropriate tax adjustment, with due regard to the Convention and consultation between competent authorities.

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