International Tax
Arm's Length Price — Meaning
The price unrelated parties would charge each other — the standard for related-party transactions.
What is Arm's Length Price?
Transfer pricing rules require transactions between associated enterprises, such as an Indian subsidiary and its foreign parent, to be priced as if the parties were independent. The arm's length price is determined using methods such as the comparable uncontrolled price, cost plus, resale price, transactional net margin (TNMM) or profit split, benchmarked against comparable companies. Pricing that isn't at arm's length leads to adjustments that increase taxable income.
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More International Tax terms
NRI (Non-Resident Indian)
An Indian citizen residing outside India for more than 182 days in a financial year.
RNOR (Resident But Not Ordinarily Resident)
A transitional residency status for individuals who have recently returned to India after being NRIs.
DTAA (Double Taxation Avoidance Agreement)
Bilateral treaty between India and another country preventing the same income from being taxed twice.
FEMA (Foreign Exchange Management Act)
Indian law governing foreign exchange transactions, cross-border investments and NRI account operations.
LRS (Liberalised Remittance Scheme)
RBI scheme allowing resident individuals to remit up to USD 250,000 per year abroad for permitted purposes.
