Fundamentals
Transfer Pricing
Transfer pricing is the practice of setting prices for goods, services, intangibles and financing transferred between related entities within a multinational group. Tax authorities require these intercompany prices to reflect what unrelated parties would have agreed under comparable conditions, preventing profit shifting.
Every cross-border transaction between related companies, from a parent charging a subsidiary for management services to intercompany loans and licensing of trademarks, falls within the scope of transfer pricing rules. Because these transactions are not negotiated at arm's length in the same way as deals between strangers, tax.
Getting transfer pricing wrong exposes a group to double taxation, penalties and reputational damage, while getting it right supports defensible tax positions and smoother audits. Most jurisdictions base their domestic rules on the OECD Transfer Pricing Guidelines, requiring documentation, benchmarking studies and consistent.
In practice
What matters when applying transfer pricing
- Applies to cross-border and, in some countries, domestic related-party transactions
- Covers goods, services, intangibles, financing and cost-sharing arrangements
- Requires evidence that pricing matches arm's length outcomes
- Non-compliance can trigger adjustments, penalties and double taxation
- Underpinned globally by the OECD Transfer Pricing Guidelines
Frequently asked
Common questions
Who does transfer pricing affect?+
Any group with related entities transacting across borders, from large multinationals to smaller groups with just one overseas subsidiary. Even a single intercompany loan, management charge or shared service arrangement can bring a business within scope of local transfer pricing rules and documentation requirements.
Is transfer pricing illegal?+
No, transfer pricing itself is a legitimate and necessary part of running a multinational group. It becomes a problem only when prices are manipulated to shift profits artificially into low-tax jurisdictions, which tax authorities investigate and can penalise through adjustments, interest and fines.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.