The purpose of transfer pricing is to _________________.

Question

Quizplus · Accepted Answer

Transfer pricing is a tax strategy used by multinational companies to shift profits from subsidiaries in high-tax countries to those in low-tax countries. By setting the prices of internal transactions (such as goods or services sold between subsidiaries), the company can lower the tax burden in high-tax countries and increase profits in low-tax countries. This can be done legally, as long as the prices are set at an arm's length basis - meaning they are equivalent to the prices that would have been charged between independent companies. However, it can also attract scrutiny from tax authorities if prices are set unfairly or manipulated in order to avoid paying taxes.

The Purpose of Transfer Pricing Is to _________________