Site Loader

Transfer pricing isthe establishment of transfer prices that differ from market prices fortransactions between interdependent persons.Thus, under thetransfer price it is accepted to understand the price established in economictransactions between various participants of a single group of companies.The establishment ofprices between such companies is called transfer pricing.Transfer prices allowthe redistribution of the total profit of a group of persons, in favour ofpersons who are in states with lower taxes.

This is the simplest and mostcommon scheme for minimizing the taxes paid, which inevitably requiresincreased attention on the part of any state.In the world practiceit is accepted to allocate 5 basic methods of transfer pricing: Transitionaltransfer pricing, Market transfer pricing, Actual transfer pricing, Contractualtransfer pricing, Mixed transfer pricing.The first transferpricing method, oriented to production costs, seems more accessible and easierto apply. It can be used in the absence of market prices. There are three main methods fordetermining the transfer price for costs: on variable costs per unit of output,at full costs, taking into account marginal costs. The advantages of a costlytransfer pricing method include simplicity, the ability to control stakeholderswithin the enterprise, the availability of specific performers.The second method,which focuses on the market price of the goods, is used in the event that thisprice can be considered as the price of demand.

This method has gained specialpopularity in countries with market economies. The advantages of this methodare related to the objective nature of market prices, which do not depend onthe qualifications of the managers of the company’s divisions that make thecost calculations. Transfer prices based on market prices are established whenthere is a highly competitive market for the intermediate product. Then theperformance indicators of the units reflect the real economic contribution ofthe unit to the total profit.

Post Author: admin


I'm Dora!

Would you like to get a custom essay? How about receiving a customized one?

Check it out