Glossary
Arm's Length Principle
The arm's length principle requires transactions between related parties, most often the cross-border transactions inside a multinational group, to be priced as if the parties were unrelated and dealing independently. It is the foundation of Canada's transfer pricing rules, and the CRA can adjust a corporation's reported income where intercompany pricing falls outside an arm's length range. Our transfer pricing in Canada primer walks through how the rule applies to a real corporate group.
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