The Concept of Associated Enterprises

Abstract

The concept of Associated Enterprises is essential for the application of the arm's length principle, which is the internationally recognized tax standard for transfer pricing. The arm's length principle is the underlying principle of Article 9 of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention (OECD Model) and of transfer pricing laws of many countries. Virtually all tax treaties are based on the arm's length principle. As stated by Article 9 OECD Model, the arm's length principle is applied to Associated Enterprises. The concept of Associated Enterprises consists of three elements: participation in management, control and capital. Despite the importance of the notion of Associated Enterprises, there is a lack of clarity on its meaning, in particular concerning the term 'control'. This study provides an in-depth analysis of the concept of Associated Enterprises in Article 9 OECD Model.