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Question

What does non-arm's length companies mean in the context of transfer pricing?

A Companies that are not involved in international trade Correct Answer Incorrect Answer
B Companies that are owned by the same parent company Correct Answer Incorrect Answer
C Companies that are located in the same jurisdiction Correct Answer Incorrect Answer
D Companies that sell goods and services at the same price Correct Answer Incorrect Answer
E Companies that are involved in multiple sectors 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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