What is Transfer Pricing?
Transfer pricing is the term used to describe all aspects of
intercompany pricing arrangements between related business
entities, such as a Hong Kong business and an overseas branch.
Related parties include not only parties within the same group, but
also parties which have a link of direct or indirect control,
including control over the board of directors.
Transfer pricing rules generally apply to intercompany transfers
of tangible assets, which include fixed assets such as machinery,
building and land, and current assets such as inventory and cash,
as well as transfers of intangible property, which includes
intellectual or legal rights.
Hong Kong's Inland Revenue Department (IRD) sets transfer
pricing rules to ensure that prices used by connected companies are
in line with the prices that unconnected companies would charge
under comparable circumstances. In other words, that they are
priced at real market value. This prevents
