- 5 Marks
Question
The Transfer Pricing Unit of the Ghana Revenue Authority frowns upon any transaction between controlled persons that is not conducted at arm’s length.
Required:
What is arm’s length price and its effect on tax revenue?
Answer
Arm’s length price is the market price of goods and services agreed upon by willing and knowledgeable buyers and sellers in the open market.
Effect on Tax Revenue:
The arm’s length price ensures that tax administrators can use it in transactions between related parties. It promotes accurate reporting of income, enabling the Ghana Revenue Authority (GRA) to assess the correct tax liabilities for businesses, preventing revenue loss through transfer pricing manipulation.
(Total: 5 marks)
- Tags: Arm's Length Pricing, Controlled Transactions, Tax Revenue, Transfer Pricing
- Level: Level 3
- Topic: Arm's Length Price, International taxation
- Series: MAY 2018
- Uploader: Cheoli