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The Evolution of the Arm’s Length Standard: Part 5 – An Increasing Focus on the Location of Decision-Makers

The OECD's most recent guidance discusses three types of control over decision making and risk: (i) the capability to make decisions to take on, lay off, or decline a risk-bearing opportunity, together with the actual performance of that decision making function, (ii) the capability to make decisions on whether and how to respond to the [...]

By | 2017-11-13T01:11:40+00:00 March 27th, 2017|

Evolution of the Arm’s Length Standard: Introduction

Transfer pricing has grown dramatically from a specialized niche practice in the 1980s to what is commonly viewed as the most important area of tax risk at the present time.  As transfer pricing has grown in importance, the definition of the key principle governing transfer pricing — the arm’s length standard — has [...]

By | 2017-11-13T01:09:58+00:00 July 2nd, 2015|

The Evolution of the Arm’s Length Standard: Part 3 — The Introduction of Profit-Based Methods

The transactional profit methods (the comparable profits method or CPM in the US and Taiwan; the transactional net margin method or TNMM almost everywhere else) shifts from a standard in which transfer prices are fixed based on direct observation – e.g., at the same level of a price for the same product when sold between [...]

By | 2017-11-13T01:09:20+00:00 July 2nd, 2015|

The Evolution of the Arm’s Length Standard: Part 4 – Reasonable Alternatives

The IRS regulations and OECD Guidelines discuss the need to for taxpayers to consider "reasonable alternatives" in determining whether their transfer prices are arm's length. As a matter of first impression, this seems reasonable. When applied to arm's length prices, the question is whether a price that is observed in the third party transaction can [...]

By | 2017-11-13T01:09:10+00:00 July 2nd, 2015|