Transfer pricing involves setting prices for transactions between related entities within multinational corporations to allocate profits fairly across jurisdictions. It ensures transactions are conducted on arm's length terms and companies must adhere to transfer pricing regulations to avoid penalties. Methodologies include comparable uncontrolled price (CUP), resale price (RPM), cost-plus, profit split, and transactional net margin method (TNMM).
Documentation is crucial, detailing policies, methodologies, and analysis supporting pricing decisions. Challenges arise from global operations' complexity and different tax laws. Recent trends include increased transparency and efforts to combat base erosion and profit shifting (BEPS). Overall, transfer pricing ensures fair intercompany transactions and contributes to the sustainability of the global tax system.
- Transfer pricing structuring
- Determining the value chain, DEMPE functions, etc.
- Determining prices on intra-group sale of goods and services including Intellectual Property Rights (IPR)
- Valuation of IPR
- Valuations in connection with cross-border intercompany transfers and business restructurings
- Post-merger integration
- Transfer pricing compliance including master file, local file and country-by-country reporting.
- Preparation of intercompany agreements