International Transfer Price Issues

Question 1

What is transfer pricing?

Answer 1

Amount of which goods and services are transferred between affiliated entities (in other countries). The transfer price determines the profit or loss in each country and the taxes it will eventually owe.

Question 2

In practice, transfer pricing may be based on?

Answer 2

• Cost of the selling unit- either variable or full cost
• Market price- the price of such goods or services in the market, if available
• Negotiated price- between the buyer and selling unit