The article starts with a historic overview of the development of the arm's length principle, and the growing attention for transfer pricing by legislators and tax authorities. The origin and justification for the arm's length principle are presented, as well as the comments that have been made on the principle. After the author's analysis of the problems with the application of the arm's lenght principle, he presents his thoughts about solutions for the transfer pricing problems. Solutions are conceivable within the ambit of the arm's length principle or through the imposition of a European company tax. Outside the scope of the arm's length principle a solution can be found in socalled formulatory apportionment methods and the in 1999 presented European "Home State Taxation" system.