Arm's length principle mandates transfer pricing adjustments for associated enterprises, with corresponding tax relief through treaty coordination. Where enterprises of the two Contracting States are associated and conditions between them differ from those between independent enterprises, profits that would have accrued but for those conditions may be included in the taxable profits of the affected enterprise and taxed accordingly under the arm's length principle. If one State taxes such reallocated profits which have also been taxed in the other State, that other State shall make an appropriate corresponding adjustment, with competent authorities consulting as necessary to give effect to the Agreement and avoid double taxation.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Arm's length principle mandates transfer pricing adjustments for associated enterprises, with corresponding tax relief through treaty coordination.
Where enterprises of the two Contracting States are associated and conditions between them differ from those between independent enterprises, profits that would have accrued but for those conditions may be included in the taxable profits of the affected enterprise and taxed accordingly under the arm's length principle. If one State taxes such reallocated profits which have also been taxed in the other State, that other State shall make an appropriate corresponding adjustment, with competent authorities consulting as necessary to give effect to the Agreement and avoid double taxation.
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