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Transfer pricing refers to the rules and methods for pricing transactions within and between ... For example, gold prices might be adjusted based on the weight of the ...
Transfer prices then have to be established based on expectations of future income. [16] Mispricing is rife. [ citation needed ] Khadija Sharife and John Grobler, writing for the World Policy Journal , [ 17 ] exposed $3.5 billion minimum in transfer mispricing of African diamonds from Angola and DRC, through the use of intra-company valuation ...
A given fund transfer price will impact the measured performance of business units based on whether such business units are short of funds or have an excess of funds. The key variable which should be considered for setting the fund transfer price is the strategy of the financial institution (i.e. corporate strategy).
The transactional net margin method (TNMM) in transfer pricing compares the net profit margin of a taxpayer arising from a non-arm's length transaction with the net profit margins realized by arm's length parties from similar transactions; and examines the net profit margin relative to an appropriate base such as costs, sales or assets.
A simple example of not at arm's length is the sale of real property from parents to children. The parents might wish to sell the property to their children at a price below market value, but such a transaction might later be classified by a court as a gift rather than a bona fide sale, which could have tax and other legal consequences. To ...
Decline in consumer surplus. Price discrimination enables a transfer of money from consumers to sellers. Fairness. For example, adults paying a higher price could be unemployed, while senior buyers could be well off. Administration costs. Distinguishing submarkets increase (fixed) costs, which could lead to higher prices.
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An advance pricing agreement (APA) is an ahead-of-time agreement between a taxpayer and a tax authority on an appropriate transfer pricing methodology (TPM) for a set of transactions at issue over a fixed period of time [1] (called "Covered Transactions").