If a foreign subsidiary is located in a low tax country, the parent company would probably use a ________.
A)high transfer price on inventory shipped from the parent to the subsidiary
B)high transfer price on goods sold by the subsidiary to the parent
C)low transfer price on inventory shipped from the subsidiary to the parent
D)tax credit price to minimize local tax liabilities

Question

Quizplus · Accepted Answer

Using a high transfer price on goods sold by the subsidiary to the parent allows the parent company to shift profits from the subsidiary in the low tax country to the parent company, thereby minimizing overall tax liabilities.

If a Foreign Subsidiary Is Located in a Low Tax