background image
12.4.1. Main Rules

Definition of Related Parties

The new transfer pricing rules provide that two enterprises are deemed to be related if:

a. One enterprise owns, directly or indirectly, the majority of capital in another enterprise, or otherwise holds therein in fact the decision-making power; or

b. The majority of capital in both enterprises is held, directly or indirectly, by a third enterprise, or this third enterprise holds in fact the decision-making power in both enterprises.

Transactions with persons established in jurisdictions classified as low-tax or non-cooperative jurisdictions (see Sec. 6.5. for a definition), are deemed to be conducted with related parties, regardless of the actual relationship between the parties.

Accepted Methods

The law does not specifically require the application of specific TP methods. It only requires taxpayers to maintain documentation justifying their transfer prices, and allows the tax authorities to adjust prices deemed not to be at arm’s length. The adjustment can then be operated  by reference to the information available to the tax authorities, or, failing such information, by reference to free market conditions. In general, it is assumed that the OECD traditional and transactional methods would be accepted.


The law does not require the use of specific comparables and taxpayers are theoretically free to substantiate their transfer pricing policy based on any comparables. The tax authorities, on the other hand, are empowered to adjust prices based on any information available to them or, failing that, by reference to free market conditions.