Arm's length principle ensures transfer pricing adjustments may be included and reciprocal tax adjustments required. When enterprises of the Contracting States are related and transact on conditions differing from those between independent enterprises, profits that would have accrued but for those conditions may be included in and taxed in the enterprise benefitting from them under the arm's length approach. If one State taxes such included profits that have been charged to tax in the other State, the latter shall make an appropriate corresponding adjustment, having due regard to the Agreement and after consultation between the competent authorities if necessary.
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 ensures transfer pricing adjustments may be included and reciprocal tax adjustments required.
When enterprises of the Contracting States are related and transact on conditions differing from those between independent enterprises, profits that would have accrued but for those conditions may be included in and taxed in the enterprise benefitting from them under the arm's length approach. If one State taxes such included profits that have been charged to tax in the other State, the latter shall make an appropriate corresponding adjustment, having due regard to the Agreement and after consultation between the competent authorities if necessary.
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