Article: Arm's length principle and reference range in the OECD transfer pricing guidelines convention: a comparative study aimed at the net cost plus method Journal: International Journal of Public Law and Policy (IJPLAP) 2023 Vol.9 No.3 pp.268 - 284 Abstract: For tax purposes, the terms on which they are agreed as international transactions between associated companies are at the heart of States concerns and have been the subject of study. States are fully aware that, in the absence of clear and precise rules, their own tax revenue is directly affected. In this study, we evaluated the scope of the general principle of full competition, recommended by the OECD, and its relationship with the concepts of full competition interval and full competition point, trying to determine the extent to which companies must prove that in their operations with each other they respected both the general principle and the OECD guidelines. The research problem is to understand whether companies belonging to the same economic group, when using the net cost plus method to determine whether they are complying with the arm's length principle established by the OECD in their internal economic transactions, may practice any price measure within the arm's length price range, or whether they should determine the price that, within that range, best reflects the value of the transaction. Inderscience Publishers - linking academia, business and industry through research

Title: Arm's length principle and reference range in the OECD transfer pricing guidelines convention: a comparative study aimed at the net cost plus method

Authors: João Ricardo Catarino; Ricardo de Moraes e Soares; Susana Sobral

Addresses: Centre for Public Administration and Public Policies, Institute of Social and Political Sciences, Universidade de Lisboa, Rua Almerindo Lessa, 1300-663, Lisbon, Portugal ' Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, Centro de Investigação em Ciências Empresariais, Campus do IPS - Estefanilha, 2910-761, Setúbal, Portugal ' Centre for Public Administration and Public Policies, Institute of Social and Political Sciences, Universidade de Lisboa, Rua Almerindo Lessa, 1300-663, Lisbon, Portugal

Abstract: For tax purposes, the terms on which they are agreed as international transactions between associated companies are at the heart of States concerns and have been the subject of study. States are fully aware that, in the absence of clear and precise rules, their own tax revenue is directly affected. In this study, we evaluated the scope of the general principle of full competition, recommended by the OECD, and its relationship with the concepts of full competition interval and full competition point, trying to determine the extent to which companies must prove that in their operations with each other they respected both the general principle and the OECD guidelines. The research problem is to understand whether companies belonging to the same economic group, when using the net cost plus method to determine whether they are complying with the arm's length principle established by the OECD in their internal economic transactions, may practice any price measure within the arm's length price range, or whether they should determine the price that, within that range, best reflects the value of the transaction.

Keywords: income tax; International transactions; methods; tax law; tax system; transfer pricing.

DOI: 10.1504/IJPLAP.2023.132003

International Journal of Public Law and Policy, 2023 Vol.9 No.3, pp.268 - 284

Received: 29 Sep 2021
Accepted: 29 Apr 2022
Published online: 06 Jul 2023 *

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Title: Arm's length principle and reference range in the OECD transfer pricing guidelines convention: a comparative study aimed at the net cost plus method

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