Transfer Pricing Overview

The term transfer pricing refers to a set of tax rules imposed in most countries that prevent companies from engaging in transactions with affiliates that don't mirror economic reality and thereby shift income out of high-tax jurisdictions. The governing principle of all transfer pricing regimes is that companies must pay for goods and services received from related companies using an arm's-length standard.

Simply put, a company cannot pay any more or less for goods or services it receives from an affiliate than it would pay to an unrelated company.

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