Foundations & rules

The rules and practice governing how prices are set for transactions between related parties within a multinational group.

The actual price charged for a specific good, service, loan or intangible transferred between related entities.

The OECD's authoritative, regularly updated set of principles for applying the arm's length standard to multinational enterprises.

The US statutory provision authorizing the IRS to reallocate income and deductions between related entities to prevent tax evasion or clearly reflect income.

The body of domestic legislation, regulations and administrative guidance that each country enacts to enforce the arm's length principle.

The additional tax, interest and penalties that arise when tax authorities adjust a taxpayer's income because intercompany pricing was found not to be arm's length.

The set of filing, documentation and disclosure obligations a multinational must meet in each country where it operates related-party transactions.

A group's documented, forward-looking framework for how intercompany transactions will be priced, applied consistently across entities and transaction types.

The written evidence — master file, local file, and supporting analyses — that demonstrates a group's intercompany pricing is consistent with the arm's length principle.

A standalone technical analysis — functional analysis plus benchmarking — commissioned to test or set the arm's length pricing of a specific transaction or entity.

A tax authority's formal review of a taxpayer's intercompany pricing to test whether it satisfies the arm's length standard.

The monetary sanctions a tax authority can impose for inadequate documentation, non-filing, or a sustained transfer pricing adjustment.

The range of advisory, compliance and dispute-support work that external firms provide to help multinationals set, document and defend intercompany pricing.

Specialised technology platforms used to automate transfer pricing documentation, benchmarking data management, intercompany calculations, and workflow tracking.

Reduced or waived documentation and compliance obligations that many jurisdictions grant to smaller businesses below defined size thresholds.

The UK's domestic transfer pricing regime, legislated in Part 4 of TIOPA 2010, applying the arm's length principle with specific UK exemptions and documentation requirements.

The five approaches recognised by the OECD Transfer Pricing Guidelines for testing or setting arm's length prices: CUP, resale price, cost plus, TNMM and profit split.

The OECD/G20 project addressing tax planning strategies that shift profit to low- or no-tax locations with little or no real economic activity.

The OECD/G20 framework establishing a global minimum effective tax rate of 15% for large multinational groups, operating alongside but separately from traditional transfer pricing rules.

A rule that allows eligible taxpayers to apply a simplified, pre-approved pricing outcome for specified transactions, reducing compliance burden and audit risk.