Transfer Pricing Flashcards
(4 cards)
1
Q
What is a transfer price?
A
The price at which one division sells its products/services to another division in the same group.
2
Q
What is the effect on tax of transfer pricing?
A
If the division applying the transfer price is in a country with a lower tax rate then the overall tax payable is reduced.
3
Q
What is the effect of high transfer prices?
A
This would have to be recovered when setting the selling price and so the product might not be price competitive.
4
Q
What should the company consider when setting transfer pricing?
A
- Goal congruence
- Performance measurement
- Combined tax liabilities
