Large corporate companies are these days referring to a process called international transfer pricing to serve various requirements starting from hiring new professionals to transferring products. The transfers often take place across the boundaries of two nations.

Here are a few key features and importance of international transfer pricing:

  • Across the boundary, currency changes and it often becomes difficult for the business leaders to pay in that currency. There arises the need for international transfer pricing. Many companies these days adopt the policy of transferring goods to the foreign-based subsidiaries.
  • It also helps in getting relief from customs, good taxes and similar other hassles and expenditures.
  • The countries have their own Transfer Pricing Laws. Before a company decides to undertake this policy, they would have to be well-aware of the laws. Till now, more than 60 governments have adopted these pricing laws. However, they permit the tax bodies to bring certain changes in the policy if the need is so and provided there is no intention to avoid taxes.
  • Aggressive intergroup pricing, particularly the ones for death and intangibles are known to have a significant role in the avoidance of tax.
  • Unscrupulous people and organisations often try to merge international transfer pricing with trader mis-invoicing. This should not at all be done (even though there are aggressive tax avoidance schemes in case of international transfer pricing) since they are separate policies with separate solutions.

However, the only problem with this kind of pricing is that it doesn’t seem to be realistic and ethical for many of the common people. Nevertheless, the role played by it in easing the transfer process between two countries can never be underestimated.

To conclude with, International Transfer Pricing is equally significant for both taxpayers and tax administrators because they are a determinant of income and expenses.