arm's length

(redirected from Arm's length principle)
Also found in: Dictionary, Thesaurus, Wikipedia.
Related to Arm's length principle: Arms length

arm's length

adj. the description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other. It becomes important to determine if an agreement was freely entered into to show that the price, requirements, and other conditions were fair and real. Example: if a man sells property to his son the value set may not be the true value since it may not have been an "arm's length" transaction. (See: contract)

References in periodicals archive ?
The formulary apportionment approach apparently contemplated by the significant economy presence proposal is obviously a departure from current application of the arm's length principle and will require changes to domestic laws and tax treaties.
As a result, economists, especially those with a background in financial and business economics, play an even more central role in the interpretation and application of the arm's length principle. Both tax authorities and tax advisors employ economists to help solve the transfer pricing puzzle.
In several occasions, it is difficult to put into practice the strict application of the arm's length principle. For instance, for many interfirm transactions, there are no comparable transactions between third parties, independent or not.
The global formulary apportionment alternative is mentioned here only to yellow mark the obstinacy of the OECD and to cut off alternatives to the arm's length principle even though the latter does not work and MNEs waste time and money tax planning around the rules.
But as material subsequently released to the Western Mail under the terms of the Freedom of Information Act made clear, Mr Pugh's real objection to Mr Davies was not that he was preventing poor people from attending theatrical performances (which he wasn't), but that he had strongly defended the arm's length principle.
Similar to the section 482 regulations, the Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrators ("OECD guidelines") endorse the arm's length principle as the international standard for the evaluation of intra-group pricing.
TEI commends the OECD for its work on the application of the arm's length principle to cross-border commodity transactions in the Discussion Draft.
The pounds 950m cost to be funded by bonds.: Recommendations on Third Term Culture:The arm's length principle in art's funding to be strengthened, to ensure that any direct grants made by Ministers are made via processes that are no less open than those operated by Assembly Sponsored Public Bodies.
The topics covered include the application of the arm's length principle to intangible asset transactions; intangible asset valuation and transfer; global formulary apportionment; transfer pricing documentation requirements; and resolution of transfer pricing disputes.
A profit split method is usually to be avoided due to its complexity and its relative departure from the arm's length principle when compared to more commonly used methods.