The Importance of Transfer Pricing Essays

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| The Importance of International Transfer Pricing | Country Case: Argentina | | | | International Accounting – ACG6255 Professor Robert McGee Philip Archer | Table of Contents 1. Abstract 2. Transfer Pricing Overview 3. Defining Transfer Prices 4. Arm’s Length Principle 5. Pricing Methods 6.1. Comparable Uncontrolled Price Method (CUP) 6.2. Comparable Uncontrolled Transaction Method 6.3. Resale Price Method (RPM) 6.4. Cost-Plus Pricing Method (CPM) 6.5. Transactional Net Margin Method (TNMM) 6.6. Profit-Split Methods (PSM) 6.7. Advance Pricing Agreement (APA) 6. Argentina Overview 7. Transfer Pricing Rules in Argentina 8. Conclusion…show more content…
As Choi and Meek exemplify, transfers between related business units represent 60 percent of all international trades (Choi & Meek, p. 448). Thus, one can start to understand how important it is to define accurate transfer prices. As mentioned, the globalization of markets and the rapid development of communication systems have increased the presence of trades between companies under common control. However, other factors have also helped highlight the subject. Factors like the increase of service provided within MNE’s, the continuous trading activity and the use of financial instruments have increased the amount of trade between associated parties. Political forces have also assisted in the development of transfer pricing regulations, especially now during this economic crisis as governments try to increase their income through tax collection. For example, a parent company could pay less income tax in the US by determining a higher transfer price from the product it purchases from its subsidiary located in China. Since China’s corporate income tax is 25% and the US tax rate is 35%, this arrangement would generate a higher income at the subsidiary in China and less overall income tax payment for the financial group in question. Nevertheless, such arrangements can be prevented by tax authorities in the US, since according to Section 482 of the Internal Revenue Code “the Secretary may distribute, apportion, or allocate gross income, deductions, credits, or
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