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The Arm’s Length Principle is the cornerstone of global transfer pricing regulations, ensuring fairness in intercompany transactions. It is vital for businesses operating internationally to understand this principle to remain compliant and avoid disputes with tax authorities.
A CCA is a contractual arrangement among business enterprises to share the contributions and risks involved in the joint development, production or the obtaining of intangibles, tangible assets or services with the understanding that such intangibles, tangible assets or services are expected to create benefits for the individual businesses of each of the participants.
The Comparable Uncontrolled Price (CUP) method is one of the most widely used approaches in transfer pricing. It is often discussed in the context of ensuring fair and arm’s-length pricing between related parties. Below, we’ll address the most common questions about the CUP method to help you understand its nuances and applications.
The transactional profit split method seeks to eliminate the effect on profits of special conditions made or imposed in a controlled transaction (or in controlled transactions that are appropriate to aggregate under the principles of paragraphs 3.9-3.12) by determining the division of profits that independent enterprises would have expected to realise from engaging in the transaction or transactions.
The Transactional Net Margin Method (TNMM) is one of the most commonly applied methods in transfer pricing. Its flexibility and focus on profitability make it a go-to approach when comparable data for direct price comparisons is limited. Below, we answer frequently asked questions about the TNMM to provide clarity and guidance.