What do you mean 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 company, often located in different countries.
It is important for tax purposes to ensure that these transactions are conducted at arm's length, meaning they are priced as if the entities were unrelated.
Transfer pricing can impact the allocation of profits and taxes between different jurisdictions.
Common methods for determining transfer prices include comparable uncontrolled price, cost plus, and resale price methods.
For example, a company's manufacturing division in one country may sell components to its assembly division in another country, and transfer pricing rules would dictate how this transaction is priced.

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