This article analyzes the separate-entity approach as the theoretical basis of the arm's-length principle in the transfer-pricing guidelines of the Organisation for Economic Co-operation and Development (OECD). Despite its central role, the concept lacks a clear definition, and its application appears to fluctuate between transactional, entity-level, and group-wide perspectives, potentially calling into question an unequivocal reliance on the approach as the theoretical basis of the arm's-length principle in the OECD guidelines. The purpose of this article is to analyze the definition and application of the separate-entity approach in the OECD guidelines, with the aim of clarifying its meaning, identifying potential deviations from a strictly entity-based analysis, and examining the rationale, if any, behind such deviations.