Multinational enterprises (MNEs) operating by way of wholly owned subsidiaries are responsible for an increasing percentage of global trade. This paper looks at how the existing rules based on the arm’s length principle allocate a MNE’s profit between the taxing jurisdictions in which it operates. It highlights the limitations of the arm’s length principle by reference to a centralised intangible asset model and prior academic literature. This paper then examines in greater detail how the arm’s length principle deals with MNE economic rent. The paper looks at the sources of economic rent in general, and then examines in detail the impact on economic rent of operating as a MNE by way of controlled subsidiaries rather than through independent or uncontrolled entities. The paper then examines the impact of the recent work done by the OECD on Base Erosion and Profit Shifting (BEPS) and reviews the recent Australian court decision of Chevron Australia Holdings Pty Limited v. Commissioner of Taxation  FCA 1092, proposing that the approach taken by the court in this case can be extended to allow the existing arm’s length principle to more appropriately allocate MNE economic rent to taxing jurisdictions.