Chapter 1: Basic transfer-pricing rule
Overview
310.This Chapter gives the basic transfer-pricing rule and explains the meaning of “participation condition”.
Section 146: Application of this Part
311.This section provides that the Part applies for both corporation tax and income tax purposes. It is based on section 832(3) of ICTA.
Section 147: Tax calculations to be based on arm’s length, not actual, provision
312.This section gives the conditions necessary for the Part to apply (broadly where a transaction take place between two persons who meet the “participation condition” and that transaction differs from one at arm’s length) and the basic transfer pricing rule that the profits and losses should be computed as if the transaction had been at arm’s length. It is based on paragraphs 1(1) and (2), 9(1), 10 and 11(3) of Schedule 28AA to ICTA.
313.Paragraph 1(2) of Schedule 28AA makes the basic rule subject to paragraph 8 of the Schedule. Subsection (6)(e) and (f) recognise that paragraph 8 is rewritten in Parts 5 (loan relationships) and 7 (derivative contracts) of CTA 2009.
Section 148: The “participation condition”
314.This section explains when the participation condition is met for the purposes of section 147. It is based on paragraphs 1(1), 4A(6) and 4B(1) and (2) of Schedule 28AA to ICTA.
