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Transfer pricing refers to the rules and methods for pricing transactions within and between ... providing an additional option to mitigate these data problems. ...
Whereas appropriate transfer pricing of tangible goods can be established by comparison with prices charged for similar goods to unrelated parties, transfer pricing of intangible goods, products of intellectual efforts, rarely has comparable equivalents. Transfer prices then have to be established based on expectations of future income. [16]
In his research about the social costs and benefits of transfer pricing, Ronen points out a strong similarity between the problems of dealing with externalities and the intra-firm transfer pricing problem. A solution suggested in his earlier research is applied to the social cost problem.
In addition, transfer pricing may allow for "earnings stripping" as profits are attributed to subsidiaries in low-tax jurisdictions. [217] The Organisation for Economic Co-operation and Development (OECD) has proposed a two-pillar solution to address tax avoidance schemes used by multinational corporations. The first pillar is mostly focused on ...
The SCC's statement that an arm's-length price can fall within an acceptable range of prices has also been seen as significant, and consistent with the 2010 OECD transfer pricing guidelines, as it appears to be contrary to the long-standing policy of the Canada Revenue Agency to express a preference for unweighted yearly averages of comparators ...
In 2015, the G20 supported the transfer pricing recommendations, which aims to guide governments on how profits of multinational companies should be divided among individual countries. Furthermore, the G20 is involved in developing a global tax framework.
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Additionally, companies do not have to record transfer prices for the EU tax authorities any longer. Thus, cross-border transactions within the EU would cease to give rise to specific tax costs due to conflicting qualifications. However, transfer pricing problems are replaced by allocation problems.