What is Transfer Pricing?
Transfer pricing is a financial and tax accounting practice that
determines the prices at which related entities within a corporate
group transact with each other for goods, services, intangibles, or
financing. These transactions can significantly impact a
company's financial statements, tax liabilities, and compliance
with tax regulations in different jurisdictions.
How Does Transfer Pricing Work?
Transfer pricing rules and regulations across
the globe require taxpayers to price intercompany transactions
(referred to as controlled transactions) according to the arm's
length standard/principle. That is, controlled transactions should
be priced in a manner consistent with what would have been realized
if uncontrolled taxpayers engage in the same transaction under the
same circumstances. Companies apply either transactional methods or
profits-based methods to manage transfer pricing policies.
Transactional methods compare the pricing of a
