The Lesson

Oliver Treidler

Chapter Chapter 2 in Transfer Pricing in One Lesson, 2020, pp 3-24 from Springer

Abstract: Abstract This chapter provides the reader with a pragmatic introduction to the arm’s length principle. Why the concept of one “true price” is erroneous will be explained but that MNEs can, nevertheless, find ways to set prices for intercompany transactions that reliably approximate those agreed upon between independent entities. The reader will be introduced to One Lesson of Transfer Pricing, namely, that the art of transfer pricing consists in never losing sight of the reality of a specific business when applying the arm’s length principle. By understanding how to establish an adequate level of segmentation (aggregation) when analyzing intercompany transactions and by learning how to conduct a value chain analysis, the reader will learn how to appropriately balance business and tax considerations for transfer pricing purposes. The chapter will illustrate that the arm’s length principle is not a means for tax avoidance but rather a pragmatic and comparatively transparent mechanism for appropriately “translating” a specific business model into a tax viable transfer pricing structure.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:mgmchp:978-3-030-25085-0_2

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DOI: 10.1007/978-3-030-25085-0_2

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