TRANSFER PRICING

- accounting practice which indicates the price charged by one division to another
for goods and services offered. It enables the determination of price for products
and services traded between business associates, affiliates, or jointly managed
ventures that are part of the same larger organization. This practice may provide
an opportunity for the company to save taxes due to intercompany transactions.
- This is usually done to gain tax advantages as intracompany transaction done
internationally can sometimes have lower tax rates. Furthermore, intracompany
transaction can sometimes allow a company to avoid tariffs on goods and services
transacted internationally.