business..transfer pricing?? (1 Viewer)

[sal17]

can someone please explain transfer pricing..
thanks in advance =]

 

[dtmur]

Transfer Pricing – reduce tax burden by cross border transactions between business' you own

 

[Absolutezero]

From what I remember it comes down to:

A business sells its assets to another internal part of the company (division or subsidiary) at a price not recognised as standard (a price they'd sell to another company at), in order to distribute the allocation of profits. The company would attempt to maximise it's profits in low tax countries, and minimise in high tax countries.

It's a little wordy though.

 

[dtmur]

jus checked text book, and it says along the lines of that which absolutezero said, but notes from the teacher said otherwise :-{

 

[CMCDragonkai]

What I don't get is, why go through so much trouble of selling to another subsidiary. Can't you just transport it, and only incur transport costs? Almost like giving it away free of charge to the other subsidiary. Why don't do that?

 

[ktna]

because that would count as a loss in the stocktake report and plus you and your subsidiary arent the same business you just belong to the same parent company, so instead you sell it at a lower price to the subsidiary(usually in low tax rate countries), which reduces your profit thus meaning you have to pay less tax.

 

[Eddykungfu]

This is the syllabus point in Global Business I didn't completely understand.

Thanks guys!