Page 48 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

I I . T R A N S F E R P R I C I N G

G U I D E L I N E S U N D E R O E C D

Introduction

Transfer pricing rules are an inescapable part of doing business
internationally.

Transfer pricing relates to the determination of taxable profits
that an enterprise realizes from transactions with associated
enterprises. The international consensus is that these profits

should be comparable to the profits that would have been real-
ized in comparable transactions between independent enterpris-
es. This is the arm’s length principle embodied in many

countries’ domestic tax legislation.

In most cases the risk of double taxation is the biggest problem
arising from the transfer pricing rules. An adjustment by the
taxing authorities will typically result in a tax jurisdiction taxing

40