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Transfer Pricing

Amit (ca student) (112 Points)

08 September 2007

Dear Sir,

Please clarify the concept of Transfer Pricing & Its impact on accounts & tax treatment.

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2 Replies

MAHENDRA IYER (SERVICE) (315 Points)
Replied 10 September 2007

Transfer pricing refers to “prices at which an enterprise transfers physical goods and intangible property or provides services to associated enterprises” It relates to the system of pricing the transfer of goods, services and intangibles between associated enterprises of a multinational enterprise. The Regulations provide a statutory framework which can lead to computation of reasonable, fair and equitable profits and tax. It protects the right of the country to collect due share of tax in respect of transactions between associated enterprises. Absence of regulations allows multinationals to shift profits to low tax jurisdictions by manipulating prices of intra group transactions.