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BlauStein: Interesting Facts
Transfer Pricing Schemes
A transfer price is a price established in business activities between departments of one company or between participants of one company’s group (those transactions are often called “regulated”). A transfer price can be different from the price for a similar product settled on the open market.
Tax considerations are often the reason for managing the transfer price. It is especially popular at transnational companies and holdings. As taxes are essentially different in various countries, redistribution of the whole holding’s profit by transfer ring pricing methods in favor of less ratable elements of the holding is interesting for the financial management of international holding companies. Particularly, those less ratable elements can be completely tax-free offshore companies. The easiest variant of this scheme is the export or import of goods through a transit offshore company with oriented overstatement/ understatement purchase and sale value of the product or service.