Transfer pricing involves setting prices for transactions between affiliated businesses. It's about determining fair prices for goods or services exchanged within the company. This practice enhances pricing accuracy, boosts efficiency, and simplifies accounting procedures.
By optimizing processes, it reduces labor costs. Ultimately, transfer pricing aims for greater profitability and better business strategies. Read this article to learn more about Transfer Pricing for CA Exams .Transfer pricing is a financial strategy used by businesses to set prices for transactions that happen within the company or between related companies. These transactions could be between different departments, subsidiaries, or the main company. The idea is to decide on a fair price for goods or services exchanged. This can also include things like paying for the use of patents or research.
Big companies with branches in multiple countries can use transfer pricing to divide up their profits among these different branches. While this is legal and can help with managing finances, sometimes companies might misuse it to pay less in taxes overall. By adjusting the prices they use for these internal transactions, they can lower the amount of tax they owe. This is often done by moving profits to countries where taxes are lower.Also Check: | |
Management Accounting | Financial Accounting |
Auditing and Assurance | Taxation |
Financial Management | Business Laws and Ethics |
Also Check | |
Activity-Based Costing (ABC) | International Standards on Auditing (ISA) |
Continuing Professional Development for Chartered Accountants | Direct Tax |
Due Diligence | Tax Audit |