The context does not provide a specific list of recommended best practices for the arm's length principle. However, it does provide some guidance on how to effectively cope with transfer pricing challenges.

Firstly, it suggests that it is important to think about business and economics first, and tax law second. This means that understanding the economic realities of your business and how transfer pricing impacts it is crucial. It is more important to have a solid understanding of your business than to have expert knowledge of specific laws and regulations.

Secondly, the context emphasizes the importance of gaining an improved understanding of the arm's length principle. The arm's length principle is a standard used to determine the transfer prices between related entities in different jurisdictions. By understanding this principle, you can minimize transfer pricing-related tax risks.

Lastly, the context mentions that entrepreneurs embracing the concept of the arm's length principle and demonstrating that it ensures a sensible alignment between the economic realities of their business and taxation can be a powerful promotion of the standard.

Overall, the recommended best practices for the arm's length principle involve understanding the economic realities of your business, gaining knowledge of the arm's length principle, and demonstrating its alignment with your business operations and taxation. When setting up an offshore investment entity, there are several things you need to be aware of. First, you should carefully consider the specific facts and circumstances of your case to determine the most appropriate method to use. Second, it is important to critically evaluate whether the chosen method can be regarded as reliable on a stand-alone basis. In most cases, combining the chosen method with a secondary method will offer an advantageous trade-off. Third, you should collect and archive the necessary data required for the chosen method. Fourth, you need to substantiate the economic activity of the offshore investment entity in detail, especially if it exhibits a non-routine functional and risk profile. Fifth, you should ensure that you have sufficiently reliable data for the comparability analysis. Finally, you must provide detailed documentation on the adjustment calculation and consider how restrictive the comparability criteria tend to be applied. The professional keywords in the context of the document that tax authorities used to assess violations are:

• tax auditors
• regulations
• national tax authority
• transfer pricing audits
• arm's length principle
• regulatory framework
• economic substance
• aggressive tax-avoidance schemes
• profit shifting
• anti-avoidance provisions
• tax challenges
• digital economy
• corporate tax rules
• virtual permanent establishment
• formulary apportionment