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From international regulations to calculation methods, there are many technicalities to manage when it comes to transfer pricing. After a brief industry overview, we’ll help break down the five transfer pricing methods, along with the pros and cons to each approach.
The OECD Transfer Pricing Guidelines (OECD Guidelines) provide 5 common transfer pricing methods that are accepted by nearly all tax authorities. The five transfer pricing methods are divided in “traditional transaction methods” and “transactional profit methods.”
Transfer pricing is a legal technique used by large businesses to move profits around from parent companies to subsidiaries and affiliates to ensure funds are evenly distributed.
The EY Worldwide Transfer Pricing Reference Guide 2020-2021 is a publication designed to help international tax executives identify transfer pricing rules, practices and approaches. These must be understood for a company to carry out both transfer pricing compliance and planning activities in the base erosion and profit shifting (BEPS)1 era.
Transfer price, also known as transfer cost, is the price at which related parties transact with each other, such as during the trade of supplies or labor between departments. Transfer prices...
Under the current transfer pricing rules, all transfer pricing methods advocated by the OECD Guidelines are acceptable — namely, CUP, resale price, cost-plus, TNMM and profit split.
Transfer Pricing Methods. Parts II and III of this chapter respectively describe “traditional transaction methods” and “transactional profit methods” that can be used to establish whether the conditions imposed in the commercial or financial relations between associated enterprises are consistent with the arm's length principle.