How Legislation Deals With Transfer Price

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As mentioned briefly above, there aren’t yet any unified standards to how legislation deals with transfer price. Although there is a set of guidelines companies and countries follow, more work is required to truly unify the regulation and to ensure companies don’t take advantage of existing loopholes.

Country specific rules

All countries tend to have certain country-specific rules regarding transfer pricing. This is especially true when it comes to the key global economies such as the US and China.

Country-specific transfer pricing rules are especially important to know for companies that operate around the world. You can find plenty more information from the country’s tax or trade authority.

Here are some of the key points to note when it comes to the US and China. First, some of the main points from the US transfer pricing rules include:

• The US uses the principle of comparable profits method (CPM). Under the model the transfer price’s validity is tested by comparing the unit’s overall results with another similar business, instead of simply focusing on the transaction.
• The US permits shared services agreements.
• The US considers the conduct of the parties more important than the contractual terms if the case is being reviewed.
• The tax authorities cannot adjust prices that are found to be within the arm’s length range in the US.

Key points for China:

• China used the OECD guidelines until 2009,when it announced its own guidelines.
• The guidelines give

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