What Is a Transfer Price?

The transfer price refers to the internal price of the enterprise group determined by the transfer of products, semi-finished products, raw materials or mutual provision of services, exclusive rights, secret formulas, funds and credit among related enterprises. If the transfer price is a kind of transaction price, it has no special content itself. Because the related parties engaged in transaction activities can artificially use the transfer price to make the cost accumulate as much as possible in the high-tax country, so that the profits are concentrated in the low-tax country or the non-tax country to the maximum extent. Price has become an important issue in international tax relations. The formation of the transfer price problem is premised on the differences in the tax systems of the relevant countries. If countries adopt the same tax rate and taxation method, taxpayers will not be able to avoid the tax through the transfer price. ^[1]