Business

Everything which people need to know about the concept of transfer pricing

Transfer pricing is the comprehensive term that can be used to describe different aspects of the inter-company pricing arrangements between different kinds of business entities. The prices of goods transferred from the countries operations to its units elsewhere as the company will increase the subsidiaries, joint ventures are known as the transfer pricing. This can be perfectly done to increase the ultimate profit of the company as a whole. Inter-company transactions across the borders are growing rapidly and are becoming much more complex. So, it is very much advisable for people to seek the services of professionals in this particular field to streamline everything very easily.

 Some of the very basic objectives of choosing the domestic transfer pricing in India have been perfectly explained as follows:

  1. This is the best way of improving the competitiveness in the international marketplace
  2. This is the best way of introducing the reduction of taxes and tariffs in the long run
  3. This particular concept is directly linked with the management of the cash flows
  4. Transfer pricing always helps in minimisation of the foreign exchange risks
  5. Transfer pricing always makes sure that avoidance of conflict can be undertaken very easily so that there is no taxation issue at any point in time.
  6. The price which has been perfectly assumed to have been charged by one part of the company for products and service will be provided to the other system which will further make sure that calculation of division’s profit and loss separately will be easily undertaken.

 There are different types of transfer pricing methods for example cost-based method at the market price based method. Under the market-based transfer price method, the presence of competitive and stable external markets for the transferred product will be carried out very easily and the firms will be using this particular method as the transfer price. On the other hand in the cost-based transfer price method, the price will be based upon the production cost of the upstream division. The cost-based transfer price requires the different kinds of criteria to be considered the whole process and some points are:

  • Actual cost or the budgeted cost
  • The variable cost of the full cost
  • Amount of backup
  • Negotiate a transfer price which will be carried out by the senior management systems in the whole process.

 The basic advantages of the concept of transfer pricing have been explained as follows:

  1. Availing the services of experts in this particular industry will always make sure that people will be able to lower down the cost of duty by shipping goods into high tariff countries at minimum transfer price. In this particular manner duty base and duty will be comparatively low.
  2. There will be a significant reduction in the income taxes in high-tech countries by overpricing goods transferred to the units into such countries. So, profits are eliminated and shifted to the low taxation countries very easily.
  3. There will be proper facilitating of the dividend repatriation so that inflation can be dealt with very easily and effectively.

 Hence, availing of the services of the transfer pricing advisors in Pune is very much advisable to ensure that everything can be undertaken in the most streamlined manner.

 

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