What is Transfer Pricing?
Transfer pricing governs how related entities price intercompany transactions such as services, goods, financing, and IP use.
Key Features
- Based on the arm’s-length principle
- Applies to cross-border and domestic group transactions
- Requires consistent policies and evidence
- Can affect taxable profits in multiple jurisdictions
Practical Implementation Steps
- Define intercompany transaction categories
- Perform functional and risk analysis by entity
- Apply defensible pricing methods
- Maintain agreements and supporting documentation
Tax and Compliance Implications
Weak transfer pricing governance can trigger tax adjustments, penalties, and double-tax exposure. Consistent policy, documentation, and accounting alignment are essential.