Business restructuring of tangible goods : The restructuring of an ongoing concern with respect to profit potential in the context of the Swedish arm’s length rule.

Abstract: Enterprises when transacting with each other, are not subjected to the same market forces as independent enterprises. From a Swedish perspective the applicable rule to transactions between associated enterprises is chap. 14 para. 19. Both the Swedish arm’s length rule and its international equivalence are abstract rules of law as they merely provides the legal ramification if associated enterprises interact in a manner that independent enterprises would not. The international equivalence to the Swedish arm’s length rule is not a separate rule of law per se it is the gateway by which the Swedish rule is made applicable in international situations, through the use of a double tax agreement, with the fundamental principle that a double tax agreement can only limit, never expand a countries right to tax. The OECD Guidelines governing the general aspects of transfer pricing states that the fundamental meaning of the Guidelines is to find ways of establishing a price used between associated enterprises that are similar to what independent enterprise would conclude. The first step towards finding such a price is though the comparability analyses were all the relevant characteristics of the transferred goods is analysed. The chapter in the Guidelines that governs business restructurings is meant to be applied alongside the general aspects of transfer pricing. The Guidelines proposed way of finding an appropriate price for the transaction of a branch of production with respect to profit potential is with special consideration to risks. The profit potential is irrevocably linked with the risks transferred since it is a presumption that with increased risk there is a potential for higher profits. Although the risks are the most important aspect there are other things to look at such as other options realistically available and benefits from concluding a business restructuring.