What is the price of transfer?
The transfer price is the price that the company pays for purchasing products and services apart, whether trading between departments or between subsidiaries. For example, a car manufacturer with a subsidiary that processes the production of electrical systems, for example, would pay for each electrical system a gear price bought from a subsidiary. Because these prices are set internally, they are not subject to the same market forces that dictate prices in the open market. This is the reason for concerns in some regions, especially in terms of tax agencies that fear that they do not choose their fair share. If the goods and services were not transferred without costs, it would be difficult to determine their value at different stages of the production process. This, in turn, would make it demanding to set the price on the open market for the finished product and to determine the See how much profit that the company actually does.
Sometimes the transmission CE ison set as an open market value for a given product or service. If there is a known product or service market, it can be very easy to determine a fair price. Other companies can discount their transfer price. However, paying too little for products and services is deprived of a department or subsidiary that sells them. Shareholders who may wonder why their subsidiary is sold to external companies that pay more.
On the contrary, if the transfer price is too high, it raises questions about why the company does not receive a product or service cheaper somewhere else. While individual departments must also make a profit if they benefit from the parent company, it suggests that their price structure and operations need to be reorganized to Change. One problem that may arise is when companies are committed to buying products and services from a subsidiary in a particular country, while competitors in other countries offer the same things at much lower prices.
TaxThe authorities are interested in transferring the price especially when it concerns international transactions. If the company pays the low price for products produced overseas, the government of this country collects less taxes, while profit is concentrated in the company's home nation and tax authorities collect more taxes there. Laws have been passed to resolve this problem and ensure that the prices are fair and honest.