Transfer Pricing In International Transactions – An Overview

Background:

Transfer pricing refers to the pricing strategy in play when there is transfer of goods/ services between associated enterprises. Transfer pricing law aims to ensure that transactions between associated enterprises¹ does not happen at an unreasonably favorable and controlled price.

Objective of transfer pricing law:

The main objective of transfer pricing law in international transactions is to ensure that transactions between associated enterprises take place at a price as if the transaction was taking place between unrelated parties.

International Transactions between two associated enterprises²:

An 'international transaction' in the context of transfer pricing law shall include a transaction between two or more associated enterprises, either or both of whom are non-residents wherein there is purchase, sale or lease of tangible or intangible property, or there is provision of services, or there is lending or borrowing of money.