• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Transfer Mispricing

Y

yogesh167

Member
Hello
Hope you are doing well.

I could not understand the sentence in the context on Pg16 of Ch6 here:
'profit shifting through transfer mis-pricing, ie by setting prices for intra-group transactions which are inconsistent with market rates or by levying high charges for the use of intellectual property such as trademarks.'

Please help me to understand the same.

Thanks in advance
Yogesh
 
Hi Yogesh

So one example might be where a company has several divisions, each in a different country and each performing a different role. Eg perhaps one division is responsible for extracting raw material, another for manufacturing and another for marketing and distributing the finished product.

The transfer prices are the prices charged by one division to another for their product or service. The parent company can arrange the transfer prices so that the division based in a low-tax country makes substantial profit (which is then taxed at a very low rate) and the divisions located in countries with high tax rates never make a profit. By doing so, the company maximises post-tax profits for shareholders
 
You must log in or register to reply here.
Back
Top