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Business
Transfer Pricing
The prices charged for goods, services, or loans between companies that are part of the same group, especially across borders.
Transfer pricing rules prevent multinational groups from shifting profits to low-tax countries. Tax authorities require detailed documentation. Getting it wrong can lead to large tax adjustments and penalties.
It's the internal price list when one branch of the family business sells to another branch in a different country.
Real world: A UK company makes products and sells them to its subsidiary in Ireland. The price must be set at 'arm's length' (what an unrelated company would charge) so the UK doesn't lose too much taxable profit to the lower-tax country.
💡 Transfer pricing keeps multinational tax planning fair — and heavily regulated.