Another possible way of achieving the objective of increasing certainty, is to agree an acceptable range of results from applying the method of the MAP APA. In order to conform with the arm’s length principle, the range should be agreed by all affected parties in advance, thereby avoiding the use of hindsight, and based on what independent parties would have agreed to in comparable circumstances (see paragraphs 3.55-3.66 for discussion of the range concept). For example, the quantum of an item, such as a royalty, would be accepted so long as it remained within a certain range expressed as a proportion of the profits.
TPG2022 Chapter IV Annex II paragraph 49
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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Annex II to Chapter IV – Conduction of APA and MAP | Tag: Arm’s length range, Use of range
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