Transfer Pricing

What is Transfer Pricing?

Transfer pricing refers to the rules and methods for pricing transactions between different branches or subsidiaries of the same multinational company. These prices should ideally reflect what independent parties would charge each other in an “arm’s length” transaction.

Why It Matters

• It prevents companies from shifting profits to low tax jurisdictions to avoid paying their fair share of taxes.

• Tax authorities around the world closely scrutinize transfer pricing to ensure that local profits are reported accurately.

• Incorrect transfer pricing can lead to double taxation and significant adjustments during a tax audit.