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Transfer Pricing Consultants in Brookefield
MS Legal Associates:We are Transfer Pricing Consultants in Brookefield.
Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price. Legal entities considered under the control of a single corporation include companies that are wholly or majority owned ultimately by the parent corporation. Certain jurisdictions consider entities to be under common control if they share family members on their boards of directors. Transfer pricing can be used as a profit allocation method to attribute a multinational corporation's net profit (or loss) before tax to countries where it does business. Transfer pricing results in the setting of prices among divisions within an enterprise.
Price charged by individual entities for goods or services supplied to one another in multi-department, multi-office, or multinational firms. Transfer price policy is generally aimed at (1) evaluating financial performance of different business units (profit centers) of a conglomerate, and/or to (2) shift earnings from a high tax jurisdiction to a low-tax one. Tax authorities usually frown upon transfer pricing aimed at tax avoidance and insist that each internal part of the firm deals with the other on 'arm's length' (market price) basis. Also called transfer cost.
In principle, a transfer price should match either what the seller would charge an independent, arm's length customer, or what the buyer would pay an independent, arm's length supplier. While unrealistic transfer prices do not affect the overall enterprise directly, they become a concern for government taxing authorities when transfer pricing is used to lower profits in a division of an enterprise located in a country that levies high income taxes and raise profits in a country that is a tax haven that levies no (or low) income taxes.
Transfer pricing can be used as a tool for corporate tax avoidance, also referred to as base erosion and profit shifting (BEPS). The OECD has adopted (subject to specific country reservations) fairly comprehensive transfer pricing guidelines. These guidelines have been adopted with little modification by many countries. Notably, the United States and Canada have adopted rules which depart in some material respects from OECD guidelines, generally by providing more detailed rules.
Transfer pricing should not be conflated with fraudulent trade mis-invoicing, which is a technique for concealing illicit transfers by reporting falsified prices on invoices submitted to customs officials. "Because they often both involve mispricing, many aggressive tax avoidance schemes by multinational corporations can easily be confused with trade misinvoicing. However, they should be regarded as separate policy problems with separate solutions, according to Global Financial Integrity, a non-profit research and advocacy group focused on countering illicit financial flows.
In globalised environments, cross-border transactions are increasing in number and complexity and transfer pricing outcomes need to in line with business value creation. Significant increase in transfer pricing disputes and a global focus on base erosion and profit shifting has ensured transfer pricing is a focus area for all stakeholders. It is our view that strategic dispute management (such as through APAs or alternative resolution techniques) on a global basis will become increasingly crucial in companies' efforts to sustain their global transfer pricing strategies.
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