TPG2022 Chapter III paragraph 3.9

« | »

Ideally, in order to arrive at the most precise approximation of arm’s length conditions, the arm’s length principle should be applied on a transaction-by-transaction basis. However, there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Examples may include:

a) some long-term contracts for the supply of commodities or services,

b) rights to use intangible property, and

c) pricing a range of closely-linked products (e.g. in a product line) when it is impractical to determine pricing for each individual product or transaction.

Another example would be the licensing of manufacturing know-how and the supply of vital components to an associated manufacturer; it may be more reasonable to assess the arm’s length terms for the two items together rather than individually. Such transactions should be evaluated together using the most appropriate arm’s length method. A further example would be the routing of a transaction through another associated enterprise; it may be more appropriate to consider the transaction of which the routing is a part in its entirety, rather than consider the individual transactions on a separate basis. See example 26 of the Annex I to Chapter VI.

Related Guidelines