Definitions for "transfer pricing"
The price that is assumed to have been charged by one part of a company for...
The price one unit of a company charges to another unit of the same company for goods or services exchanged between the two.
The operations of a multinational corporation operating in one country often supply inputs to other parts of the firm operating in another country. To calculate how much profit is made by the corporation in each country, one needs to know the value of these intra-firm international sales. Determining these values is called transfer pricing. Firms have incentive to inflate the transfer prices of sales from low-tax regions to high tax regions since this tends to reduce total tax payable.