What do you understand by Transfer pricing

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Accepted Answer

Transfer pricing refers to the setting of prices for goods and services sold between related entities within a multinational company.

Transfer pricing is used to determine the value of transactions between different parts of a multinational company.
It helps ensure that transactions are conducted at arm's length, meaning they are priced as if the entities were independent.
Transfer pricing can impact tax liabilities, as tax authorities want to prevent companies from shifting profits to low-tax jurisdictions.
Methods for determining transfer prices include comparable uncontrolled price, cost plus, and resale price methods.
Documentation of transfer pricing policies is important to demonstrate compliance with regulations.

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