There are a wide variety of approaches used in transfer pricing policies to ensure compliance with the arm’s length principle. The variety of transfer pricing policies arises due to the differing scope and responsibility transacting parties possess, availability of arm’s length data, industry forces and business strategies. One other factor that influences the establishment of a transfer pricing policy is the materiality or magnitude of the transaction. In particular, companies with transactions that have low volumes or low materiality find unique ways of adhering to the arm’s length principle and pursue highly pragmatic approaches for their transfer pricing policies.
By Dean Morris
published in the Tax Management Transfer Pricing International Journal, December 2011, Copyright 2011
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