In some cases, the att-end principle may entail an administrative burden, both for the taxable person and for the tax administrations, for the assessment of a considerable number and type of cross-border transactions. Although affiliated undertakings generally set the terms of a transaction at the time of their transaction, they can at some point prove that they are compatible with the arm`s length principle. (See discussion of timing and compliance issues in chapter III, sections B and C, and chapter V on documentation). The tax administration could also be obliged to participate in this verification process, perhaps a few years after the transactions. The tax administration would verify all supporting documents produced by the taxable person in order to demonstrate that its transactions are compatible with the arm`s length principle and might also need to collect information on comparable uncontrolled transactions, market conditions at the time of transactions, etc., for multiple and different transactions. Such an undertaking usually becomes more difficult over time. Transfer pricing is important for both taxpayers and tax administrations, as it largely determines the revenue and expenditure and thus the taxable profits of related companies in different tax jurisdictions. Transfer pricing problems originally arose in transactions between related companies exercising the same fiscal sovereignty. Domestic issues are not taken into account in these guidelines, which focus on international aspects of transfer pricing. These international aspects are more difficult to manage, as they concern more than one tax jurisdiction and, therefore, any transfer pricing adjustment in one country implies that an appropriate modification is appropriate in another country. However, if the other jurisdiction does not agree to make an adjustment to this effect, the multinational group will be taxed twice on this part of its profits. In order to minimise the risk of such double taxation, it is necessary to reach an international consensus on how to set the transfer prices of cross-border transactions for taxation. The global distribution of forms would distribute the global profits of a multinational group on a consolidated basis among associated companies in different countries, on the basis of a predetermined and mechanized formula.

The application of the overall allocation of forms would be three essential elements: the determination of the taxable unit, i.e. that of the subsidiaries and branches of a multinational group which should include the global taxable unit; accurately determine global benefits; and the definition of the formula to be used to allocate the overall benefits of the unit. . . .

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