What is Transfer Pricing?
Transfer Pricing can be defined as the determination of the cost of transactions of goods and services between two related companies owned and/or operated by the same parent company, often across international borders. Companies often use transfer pricing to avail themselves of tax benefits. Multinational companies avail the benefits of different tax regimes by practising transfer pricing. The main objective of transfer pricing is deciding the transaction costs of these intra-group transactions. Transfer Pricing undertakes the concept of the Arm’s Length Principle.
Geeky Takeaways:
- Transfer Pricing matters because it directly affects the allocation of profits, tax liabilities, and revenue collection.
- Companies avail benefits by using different tax regimes when they practice transfer pricing.
- Transfer Pricing ensures the applicability of the Arm’s Length Principle.
Table of Content
- What is Arm’s Length Principle?
- Purpose of Transfer Pricing
- Importance of Transfer Pricing
- Issues Related to Transfer Pricing
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