Transfer Pricing for Multinationals

Transfer Pricing for Multinationals

Transfer pricing is internal pricing from one subsidiary to another. In international context transfer pricing mean that goods are transfer from subsidiary in one country to subsidiary in other Country.

Transfer Pricing & Taxation

Transfer pricing may be used by multinationals companies to reduce the tax liabilities by following methodology

1.    High Transfer Price – ( Transfer from low tax country to High tax country)

2.    Low Transfer Price – ( Transfer from High tax company to low tax company)

Transfer Pricing & Shifting Profit

Transfer prices may be used by multinational companies to shift the profit from one country to another country, This concept is used to manipulate the tax as explained above, it is important the transfer price for one subsidiary is transfer cost for others.

By increasing transfer price means you are maximizing the profit or retaining the profit, while by reducing the transfer prices, you are shifting the profit.