The context does not provide specific information about all the recommended best practices for arm's length pricing. However, it does mention the utilization of the arm's length principle as the fundamental criterion for allocating the tax bases of Multinational Enterprises (MNEs) between different countries. The arm's length principle requires that the nature of a transaction between related parties is in accordance with that of a comparable transaction between unrelated parties in similar circumstances.

In order to provide guidance on how the arm's length principle should be determined, international organizations such as the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN) have developed guidelines. These guidelines, such as the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, provide a framework for taxpayers and tax administrations to assess transfer pricing arrangements.

The guidelines emphasize the importance of conducting a thorough analysis of the contributions of all associated enterprises to the creation of value, especially through the performance of functions. This means that the functions performed, assets used, and risks assumed by each party involved in a transaction should be taken into consideration when determining the arm's length price.

Additionally, the guidelines recognize that in certain cases, the arm's length principle may not be sufficient to prevent the erosion of the tax base. In such cases, the guidelines suggest the consideration of 'special measures' or rules that may deviate from the arm's length principle. These special measures could include anti-avoidance provisions, such as thin capitalization rules, to prevent the erosion of the tax base through excessive interest expenses on loans.

Overall, the recommended best practices for arm's length pricing involve conducting a comprehensive analysis of the functions, assets, and risks of all parties involved in a transaction and considering the need for additional measures to prevent tax base erosion. When setting up an offshore investment entity, there are several factors to be aware of based on the given context. These include:

1. Control over risks: It is important to understand the concept of 'control over risks' and ensure that the offshore investment entity has the ability to exercise control over the risks associated with the investment. This means having the necessary expertise and resources to manage and mitigate these risks.
2. Financial capacity to assume risks: The offshore investment entity should have the financial capacity to absorb the risks associated with the investment. This means having the necessary funds and resources to handle any potential losses or fluctuations in the investment.
3. Options realistically available: Consider all other options realistically available before entering into the investment. This means assessing alternative investment opportunities and only proceeding with the offshore investment if it offers the most attractive opportunity compared to other options.

By keeping these factors in mind, you can ensure that the offshore investment entity is set up in a way that aligns with the principles outlined in the given context.