Concept and application of the arm’s length principle

Abstract

This article includes the overview of the arm’s length principle (ALP), its description, evolution, examples of transactions which are made using such a principle, and the methodologies it applies. The arm’s length principle is the key for ensuring the transparency of trade affairs. An arm's length transaction is a transaction in which the buyers and sellers of a product act independently and have no relationship to each other. This transaction is concluded at the arm’s length price, which would have been determined if such transactions were made between independent entities under the same or similar circumstances. This principle is a subject of particular interest due to the fact that it is not applied in Moldova, while it is used in international practice, and in the nowadays integration process of the Republic of Moldova in the European Union and more active participation of our country in world trade the study of this principle becomes a necessity.