What is transfer pricing

Question

Accepted Answer

Transfer pricing is the setting of prices for goods, services, or intangible assets transferred between related entities within a multinational company.

Transfer pricing is used to determine the price at which goods or services are transferred between different divisions or subsidiaries of a company.
It is important for multinational companies to set transfer prices that are fair and reflect the market value to avoid tax evasion or profit shifting.
Transfer pricing can involve tangible goods, such as raw materials or finished products, as well as intangible assets like intellectual property or royalties.
Transfer pricing regulations vary across countries, and companies need to comply with local tax laws and transfer pricing guidelines.
For example, if a company has a manufacturing division in one country and a sales division in another country, transfer pricing determines the price at which the manufacturing division sells its products to the sales division.

Accepted Answer

Transfer pricing is the determination of an exchange price for a product or service

when different business units within a firm exchange it. The products can be final

products sold to customers or intermediate products. This determination of transfer

price is desirable from both a management perspective and tax purposes.

What is transfer pricing

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