armslengthsuhteessa

Arns length suhteessa, or arms-length relationship, refers to a relationship between parties that is independent and not subject to control or undue influence by one another, enabling market-based terms. The term is used in Finnish business, law, and accounting to describe transactions or arrangements between unrelated or unaffiliated entities.

The concept derives from the idea that dealings between related parties should resemble those between independent parties to prevent preferential treatment, price manipulation, or other distortions. In practice, the arms-length principle requires that terms, pricing, and conditions reflect what would occur in a competitive, market-driven setting.

Contexts where the term is applied include tax and transfer pricing, corporate governance, and public procurement. In transfer pricing, related-party transactions are priced as if the parties were independent, ensuring appropriate tax outcomes and avoiding profit shifting. In corporate governance, arms-length relations emphasize board and management independence from shareholders or controlling interests. In public procurement, competition is expected to be fair and transparent to all bidders.

Regulatory frameworks that influence arms-length practices include OECD transfer pricing guidelines, BEPS actions, and IFRS/IAS 24 related-party disclosures. National authorities, including those in Finland, implement these principles through tax rules and accounting standards. The concept also intersects with related terms such as related-party transactions and the arm’s length principle.

Challenges include determining truly comparable market terms, especially for unique or specialized transactions, and maintaining adequate documentation to support pricing and decisions.