The transfer pricing guidelines provide guidance on the application of the arm’s length principle, which represents the international consensus on the valuation for income tax purposes of cross-border transactions between associated enterprises.

In today’s economy where multinational enterprises play an increasingly prominent role, transfer pricing continues to be high on the agenda of tax administrations and taxpayers alike. Governments need to ensure that the taxable profits of multinationals are not artificially shifted out of their jurisdiction and that the tax base reported by multinationals in their country reflects the economic activity undertaken in those jurisdictions and taxpayers need clear guidance on the proper application of the arm’s length principle.

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