It is specifically used in contract law to agree on an agreement that resists legal scrutiny, even if the parties may have common interests (for example. B employer-worker) or are too closely related to be considered totally independent (for example. B, the parties have family ties). This principle is often invoked to avoid undue influence by the government on other institutions such as the legal system, the press or the arts. In the Arts Councils of the United Kingdom, for example, which work “on the length of the arms” to allocate the funds they receive from the government. [2] Is there a translation missing, do you have a mistake or do you just want to praise us? Fill out the comment form. The email address is optional and our privacy policy only serves to respond to your request. For example, a transaction involving a father and son is unlikely to result in the same result as an agreement between foreigners, because the father may choose to give a discount to his son. Do you have any comments on our online dictionaries? Please confirm that you are a human being by ticking a box.

An arm length transaction refers to a transaction in which the buyer and seller act independently without any party influencing the other. These types of sales assert that both parties are acting in their own interest and are not under pressure from the other party; In addition, it assures others that there is no collusion between the buyer and the seller. In the interests of fairness, both parties generally have equal access to information about the agreement. Similarly, international sales between companies that are not of arm`s length, such as two subsidiaries. B of the same parent company, must be carried out at prices of arm length. This practice, called transfer pricing, ensures that each country collects the corresponding taxes on transactions. The Organisation for Economic Co-operation and Development (OECD) has adopted the principle of Article 9 of the OECD Model Tax Convention to ensure that transfer prices between multinational companies are set on the basis of market value. In this context, the principle is that prices should be the same as they would have been if the parties to the merger had not been linked. This is often seen as targeted to prevent profits from being systematically derogated from low-tax countries, although most countries are also concerned about prices that, because of inattention and not design, do not comply with arm length review and carry profits in any other country (whether low or high tax rates). The OECD`s model tax convention provides a legal framework for governments to get their fair share of taxes and businesses to avoid double taxation of their profits. The arm length standard is critical to the amount of profits that should be attributed to a company and, therefore, the size of a country`s tax liability on that unit. The OECD has developed in-depth guidelines for the application of the principle of weapons length in this context.

[3] Under this approach, a price is considered reasonable if it falls within a price range charged by independent parties trading arms. This is generally defined as a price that an independent buyer would pay an independent seller for an identical item on identical terms if neither is forced to act. It is also a key element of international taxation, as it allows for an adequate distribution of excise duties on countries that enter into double taxation agreements, through transfer pricing between them. Transfer pricing and the principle of arm length have been a priority of the BASE Erosion and Profit Shifting (BEPS) project, developed by the OECD and approved by the G20. [1] In the workplace, supervisors and managers are responsible for staff discipline and the termination of the employment relationship on the part of the re-establishment department