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Question

Which of the following correctly describes Transfer Pricing?

A The price of goods and services in different jurisdictions Correct Answer Incorrect Answer
B The price non-arm's length companies charge each other for goods and services Correct Answer Incorrect Answer
C The cost of international trade Correct Answer Incorrect Answer
D The exchange rate between currencies Correct Answer Incorrect Answer
E The exchange rate value of Foreign Portfolio Investment made in Blue Chips Stocks Correct Answer Incorrect Answer

Solution

Transfer pricing relates to the price, non-arm’s length companies located in different jurisdictions, charge each other for goods and services. In a global economy dominated by transnational corporations, global transfer pricing is becoming increasingly important for multinationals. Global transfer pricing helps corporations develop transfer pricing policies that maximise the potential for increasing the company’s after-tax income, while minimising the likelihood that it will be subject to tax adjustments and penalties.

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