The profit split method in its current form is a relatively new part of the OECD transfer pricing guidelines for multinationals and tax authorities. First emerging in a 2018 report and recently incorporated in the official guidelines themselves, one might observe that the importance of the method is rapidly growing. This paper examines the inner workings of the profit split method and how the method relates to the arm´s length principle, the use of predetermined formulas and Swedish internal tax law. The OECD firmly states that the profit split method is an application of the arm´s length principle. This paper concludes that the profit split method is somewhat problematic in relation to the arm´s length principle in that it uses a very different methodology than what is described in the classical definitions of the arm´s length principle in tax treaties and internal law, which states that the internal price used by multinationals should not differ from an external market price of the goods or services traded. The profit split method instead uses a formulaic approach to divide the income between states, which in my view is something different than comparing the internal price to an uncontrolled price as described in the definitions of the arm´s length principle. This may cause an unpredictable situation for both multinationals and tax authorities.