International business

Transfer pricing

Transfer pricing is the practise of determining prices of (international) transactions within a multinationally operating concern. It is important that the entities within a multinational are setting prices for their services and goods that are comparable to the prices that independent comparable parties would set when providing the same goods or performing the same services. This is called the ‘at arm’s length principle’. Transfer pricing provides methods and rules for setting prices for goods, services, royalties and internal loans (interest) between the different affiliated companies within the concern.