Arm’s length rule versus thin capitalisation
September 22, 2010
The interaction of the arm’s-length standard and thin capitalisation rules is becoming a key issue in transfer pricing, an economist said at International Tax Review Transfer Pricing Forum in Amsterdam last week.
“This is an area of strong debate,” said Antonio Russo, principal economist in Baker & McKenzie’s Amsterdam office. “There’s nothing we can conclude. These [arm’s length versus thin capitalisation] will be the two biggest areas of debate for transfer pricing in the future. It’s important these [financial] transactions are addressed. I think it’s important to focus not just on the price but on the terms and conditions.”
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