Transfer Pricing Regulations

Transfer pricing regulations are rules that govern how businesses set prices for transactions between their own divisions or affiliated companies in different countries. The aim is to ensure that these prices are fair and reflect market value, preventing companies from shifting profits to low-tax jurisdictions to avoid paying higher taxes. By ensuring that transactions are conducted at arm's length—like they would be with unrelated parties—these regulations help tax authorities calculate the correct amount of tax owed and maintain a level playing field in international trade.