Use of arm’s length range is not permittedĦ.4 The section provides that the arm’s length price shall be the arithmetic mean of the prices determined. In such cases, an attempt should be made to reach a conclusion consistent with the arm’s length principle that is satisfactory from a practical viewpoint to all the parties involved, taking into account the facts and circumstances of the case, the mix of evidence available, and the relative reliability of the various methods under considerations.” (para 1.69) However, for difficult cases, where no one approach is conclusive, a flexible approach would allow the evidence of various methods to be used in conjunction. “While in some cases the choice of a method may not be straightforward and more than one method may be initially considered, generally it will be possible to select one method that is apt to provide the best estimation of an arm’s length price. In this connection, the OECD Guidelines provide as follows: Selection of only one method is permittedĦ.3 The section stipulates selection of one method which is the most appropriate method. Thus, the Guidelines permit application of method not specified in them. However, a taxpayer should maintain and be prepared to provide documentation regarding how its transfer prices were established.” (para 1.68) Moreover, MNE groups retain the freedom to apply methods not described in this Report to establish prices provided those prices satisfy the arm’s length principle in accordance with these Guidelines. Tax administrators should hesitate from making minor or marginal adjustments. “No one method is suitable in every possible situation and the applicability of any particular method need not be disproved. Selection of a stipulated method alone is permittedĦ.2 The section provides that the arm’s length price shall be determined by applying a method specified in it.
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