Trade Talks

Depending on the design of a country’s tax system, application of the arm’s-length principle may be relevant in determining the taxable objects for one or more direct taxes (income tax, corporate tax, profits tax, etc.). Generally, most countries’ transfer pricing legislation has broad application across direct taxes. One notable exception being Ireland, where the transfer pricing legislation introduced in 2010 applies only to certain classes of income for direct tax purposes.  Countries with other specific types of direct taxes governing specific sectors or transactions types (such as a mining income tax) may need to consider application of transfer pricing legislation to them. Typically, this would be achieved through separate provisions being inserted in the relevant taxing acts. However, where a consolidated tax code has been adopted, a single set of legislation may be possible. Transfer pricing provisions may also be necessary for other types of taxes such as a resources royal...