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3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
3901799 transfer-pricing
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3901799 transfer-pricing

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  • 1.
    • Transfer pricing
  • 2. Transfer Prices Transfer Price is the price one subunit charges for a product or service supplied to another subunit Of the same Organization
  • 3. Transfer Pricing- 4 criteria's 1Goal Congruence 2 Management Effort 3 Subunit Performance Evaluation 4 Subunit Autonomy
  • 4. Purpose of Transfer Pricing Multinational companies use transfer pricing to minimize their worldwide taxes, duties, and tariffs .
  • 5. Transfer Costing- Methods 1Market Based 2Cost Based 3Negotiated
  • 6. Market-Based Transfer Prices Transferring at Market Price is best if 1 Perfectly Competitive Market 2 Interdependence of Subunit is Minimal 3 No additional Cost-benefits to company
  • 7. Market-Based Transfer Prices
    • The major drawback to market-based prices is that market prices are not always available for items transferred internally.
  • 8. Transfers at Cost
    • About half of the major companies in the world transfer items at cost.
  • 9. Transfers at Cost Variable costs Full cost Dual Pricing
  • 10. Variable-Cost Pricing
    • When market prices cannot be used, versions of “cost-plus-a-profit” are often used as a fair substitute.
  • 11. Variable-Cost Pricing In situations where idle capacity exists, variable cost would generally be the better basis for transfer pricing and would lead to the optimum decision for the firm as a whole.
  • 12. Negotiated Transfer Prices
    • Companies heavily committed to segment autonomy often allow managers to negotiate transfer prices.
  • 13. Dysfunctional Behavior Virtually any type of transfer pricing policy can lead to dysfunctional behavior – actions taken in conflict with organizational goals .
  • 14.
    • Factors affecting
    • Transfer prices.
  • 15. Multinational Transfer Pricing Example
    • An item is produced by Division A in a country with a 25% income tax rate.
    • It is transferred to Division B in a country with a 50% income tax rate.
    • An import duty equal to 20% of the price of the item is assessed.
    • Full unit cost is Rs100, and variable cost is Rs60 (either transfer price could be chosen).
  • 16. Multinational Transfer Pricing Example Which transfer price should be chosen? Rs100 Why?
  • 17. Multinational Transfer Pricing Example Income of A is Rs40 higher: 25% × 40 = (Rs10) higher taxes Income of B is Rs40 lower: 50% × 40 = Rs20 lower taxes Import duty paid by B: 20% × 40 = (Rs8)  Net savings = Rs2
  • 18. Global Pricing Considerations
  • 19.
        • a) Tax regimes
        • b) Local Market conditions
        • c) Market Imperfections
        • d) Joint-venture partner
    Criteria’s for Transfer Pricing
  • 20. Key drivers behind transfer pricing in Foreign Countries:
    • Market Conditions
    • Competition
    • Profit for the affiliate
    • Tax Rates
  • 21. Key drivers behind transfer pricing in Foreign Countries:
    • Economic conditions
    • Import Restrictions
    • Customs Duties
    • Price Controls
    • Exchange Controls
  • 22.
    • Setting Transfer Prices
      • a) Arm’s length prices:
      • use of market mechanism as a cue
      • for setting transfer prices.
      • b) Cost-based pricing (adds a mark-up)

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