What Does Arm`s Length Agreement Mean
Following the release of the report, Aphria dismissed the charges and rejected a rebuttal stating that the transactions were “negotiated along a arm`s length between two listed companies, each of which retained professional financial advisors.” If Colin sells the house abroad, it would be an arm length transaction, because both parties are independent and act in their own interest. As was mentioned briefly, transactions involving the length of weapons can have tax consequences if they are not dealt with properly, and that is why the problem often arises when it comes to tax legislation and treaties. The Organisation for Economic Co-operation and Development(OECD) model tax treaty addresses this issue in the context of transfers between multinationals. The two parties may have common interests (for example. B employers and employees) or are part of a group company (two subsidiaries) and therefore cannot be considered independent. If this is the case, the agreement in question cannot be considered a “long transaction.” It is important that the agreement, if linked to each other, be similar to the relevant industrial standard and do not show any significant differences from what was expected of such an agreement because of the relationship between the parties. In addition, the issue of long-term transactions is an issue that often comes up in real estate law. A particularly common example is the purchase of real estate by parents. Problems can arise when the value of the property is sold at an interest rate well below market value.
A simple example of what is not possible is the sale of real estate from parents to children. Parents may want to sell the property to their children at a price below market value, but such a transaction could later be considered by a court as a gift and not as a sale in good faith, which could have tax and other consequences. To avoid such a classification, the parties must demonstrate that the transaction was not carried out other than for an arbitrary third party. This could be done, for example, by hiring a disinterested third party, such as. B of an expert or broker, who could give a professional opinion on the fact that the sale price is reasonable and reflects the real value of the property.