This presentation provides an overview of transfer pricing. It was presented by a group of 6 students from the Department of Accounting & Information Systems at the University of Barisal. The presentation defines transfer pricing as intercompany pricing arrangements between related business entities for property, services, or finance transfers across borders. It discusses objectives of transfer pricing like tax reduction and cash flow management. Examples are given and methods like market-based, cost-based, and negotiated prices are explained. Benefits, challenges, and strategic factors of transfer pricing are outlined. The presentation concludes with discussing transfer pricing regulations in Bangladesh and related penal provisions.

1. Welcome to our Presentation

2. Department of Accounting & Information Systems (2nd
Batch)
University of Barisal

3. A presentation on Transfer Pricing
By group no: 05

4. Group members
ID Number Name
13 AIS 002 Sarmin Akter Mitu
13 AIS 018 Shariful Islam
13 AIS 029 Sabina Akter
13 AIS 038 Ranu Mondal
13 AIS 040 Shuvankar Halder
13 AIS 081
Rafiq-Al-Azad

5. Transfer pricing is not a science, it is a art!

6. Transfer Pricing is Big News!
1. Current surveys would indicate that transfer pricing
is one of the most important international tax issue
facing multinational enterprises (MNE’s)
2. MNE’ s managers indicate that audit s by tax
authorities are becoming a rule, rather than an
exception.
3. In the last two years more fiscal government
authorities have taken action on transfer pricing.

7. What is Transfer Pricing?
• Transfer pricing is a term used to describe
aspects of intercompany pricing arrangements
between related business entities and commonly
applies to intercompany transfers tangible
property, intangible property services and finance
transfers. • Intercompany transactions across
borders are growing rapidly and becoming more
complex.

8. Objectives of Transfer Pricing
1.Competitiveness in the international marketplace
2. Reduction of taxes and tariffs
3. Management of cash flows
4. Minimization of foreign exchange risks
5. Avoidance of conflicts with home and host governments
over tax issues and repatriation of profits
6. Internal concerns - goal congruence or subsidiary manager
motivation

9. Transfer Pricing
• The price that is assumed to have been charged by one
part of the company for products and services it
provides to another part of the company, In order to
calculate each division’s product and loss separately.
Bangladesh

10. Example of Transfer pricing
Bangladesh

11. Transfer Pricing Process

12. Transfer Pricing Methods
 Market-based transfer price
 Cost-based transfer price
- Variable cost
- pull cost
 Negotiated transfer price

13. • Market-based transfer price: In the presence of
competitive and stable external markets for the
transferred product, many firms use the external market
price as the transfer price.
• Cost-based transfer price: The transfer price is
based on the production cost of the upstream division. A
cost-based transfer price requires that the following
criteria be specified: – Actual cost or budgeted (standard)
cost. – Full cost or variable cost. – The amount of mark-up,
if any, to allow the upstream division to earn a profit on
the transferred product.
• Negotiated transfer price: Senior management
does not specify the transfer price. Rather, divisional
managers negotiate a mutually agreeable price.

14. Figure: Hiding Profits with Transfer Pricing

15. Benefits of Transfer Pricing
1. Lowering duty costs by shipping goods into high-tariff
countries at minimal transfer prices so that duty base
and duty are low
2. Reducing income taxes in high-tax countries by
overpricing goods transferred to units in such countries;
profits are eliminated and shifted to low-tax countries
3. Facilitating dividend repatriation when dividend
repatriation is curtailed by government policy by inflating
prices of goods transferred

16. Challenges of Transfer Pricing
• Internal and external problems for the multinational
corporation
–Performance Measurement • The clouding effect of
manipulating intra corporate prices on a subsidiary’s
apparent and actual profit performance • Difficulty in
maintaining relationships with subsidiaries that are
negatively impacted by transfer pricing.
–Taxation • Tax and regulatory jurisdictions contribute to
and compound transfer pricing problems. Pricing that is
justified and reasonable in the home country may not be
perceived as such in the host country.

17. Strategic Factors of Transfer Pricing
Tax Rate- minimize taxes locally as well internationally
Exchange Rate
Custom Charges
Risk of expropriation
Currency Restriction
Assist bayside division to grow
Gain entrance in the new country
Supplier’s quality or name
2. Strategic relationship
1. International Transfer Pricing Consideration

18. WTP
The global nature of this transfer pricing project required
us to develop solutions for manufacturing, distribution
and margin changes among three separately-managed
regions.
A Client wished to
establish a single
global production
facility in Bangladesh.
Provided transfer pricing
analysis and structuring
advice manufacturing
facility in China within
special Economic Zone
Recommended transfer
pricing modifications to the
global Supply chin for
finished products,
defensive transfer pricing
study and Bangladeshi tax
authorities
Case Study: Transfer Pricing
Restructuring (Bangladesh/China)

19. Transfer pricing regulation
International
“Guideline on transfer
pricing”. They serve as
generally accepted.
Practices by tax
authorities
National (Bangladesh)
The finance Act 2001
introduced the detailed TPR
w.e.f. April 1, 2001.
The income tax act.

20. Income Tax Act 1961
Section 92: 92.Computation of income from international
transaction havingregardtoarm’s lengthprice. (ALP)
Section 92 A: Meaning of associated enterprise
Section 92 B: Meaning of international transaction Section
92 C: Computation of arm’s length price
Section 92 D: keeping of information and document by
persons entering into an international transaction Section 92
E: Report from an accountant to be furnished by persons
enter-ing into international transaction
Section 92 F: Definitions of certain terms relevant to
computation of arm’s length price, etc.

21. Penal Provisions
 o Non submission of information/Records :
2% of the transaction value (u/s 271G)
 o Non submission of Report u/s 92E :
Rs. 1 lakh (u/s 271BA)
 o Non Maintenance of Records :
2% of the transaction value (u/s 271AA)
 o Penalty 100% to 300% of the tax on disputed income
 o Addition / Disallowance u/s 92C(4) is deemed to be income concealed u/s
271(1)(c)
Above penalty need not be levied if reasonable cause for failure is proved u/s 273B

22. Any questions?