All books

Professional

Apps About Coach Log in Start reading

Quantitative Finance · Glossary

What is Transfer pricing?

Definition 15.8 The Desk and the Firm · Chapter 15 — Finance, Product Control and Tax

Transfer pricing is the setting of prices for transactions between entities of the same group (services, licences of intellectual property, financing, the sharing of trading profits), which tax authorities require to be those that independent parties would agree in comparable circumstances: the arm’s length principle.

A stylised group of entities and the intra-group charges that transfer pricing must set at arm’s length: the trading entity pays the research company for its models and the member entity for its access. Schematic.
Figure 15.3. A stylised group of entities and the intra-group charges that transfer pricing must set at arm’s length: the trading entity pays the research company for its models and the member entity for its access. Schematic.
Read in context →