[Transfer pricing ]

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Transfer Pricing

Summary 2.1

Transfer pricing is defined as the price which are charged for services or goods that are usually exchanged among different units of the same organization. The term transfer prices are also used to allocate number of profits to company's units.

Assuming that a multinational company maximizes joint after-tax profits earned in the two countries, the company reduces its tax payments by using a lower transfer price. A lower transfer price allocates less profit to the United States parent company and more profit to the German subsidiary. The transfer pricing profits the organization via increased after-tax profit. Nevertheless, ...